Cathay Life Insurance Co (國泰人壽), Taiwan Life Insurance Co (台灣人壽) and China Life Insurance Co (中國人壽) this month cut their declared interest rates for interest-sensitive products due to lower bond yields.
The declared rates are used by insurers to calculate policyholders’ distributions, based primarily on their investment returns.
Cathay Life, the nation’s leading insurer with a market share of 19.19 percent, yesterday announced reductions of 5 to 10 basis points for the benchmark rates of its 62 US dollar-denominated policies, and reductions of 1 to 15 basis points for its 77 policies denominated in New Taiwan dollars.
After the revision, the rates for its US dollar products fell to 1.85 percent to 3.15 percent, while those of its NT dollar policies dropped to 0.46 percent to 1.75 percent, Cathay said in a statement.
The insurer trimmed the rates as yields of corporate bonds continued to retreat last month, with the 10-year US Treasury yields falling to about 0.54 percent, a historically low level, Cathay Life executive vice president Lin Chao-ting (林昭廷) told the Taipei Times by telephone.
As the insurer buys bonds every month, the decline in bond yields would lead to a reduction in its investment returns, Lin said.
Taiwan Life kept the rates for its US dollar policies unchanged, but cut the rates for some of its NT dollar products by 1 basis point due to the fall in Taiwan’s 10-year government bonds.
China Life reduced the rates for its five NT dollar products by 10 basis points to a range of 2.03 percent to 2.15 percent.
However, three other major insurers — Nan Shan Life Insurance Co (南山人壽), Shin Kong Life Insurance Co (新光人壽) and Fubon Life Insurance Co (富邦人壽) — kept their declared rates unchanged for this month.
Insurers’ moves on their declared rates reflect their expectation on long-term investment returns rather than their short-term capital gains or losses due to volatility in the financial market, Insurance Bureau Director Tsai Huo-yen (蔡火炎) told the Taipei Times by telephone.
“Insurers would not adjust their benchmark rates in the same direction just because our new rule took effect, as they expect different investment returns due to different investment portfolios. But we would review routinely if their changes are reasonable,” Tsai said, referring to a new rule that took effect last month requiring insurers to set up a mechanism to smoothen their declared rates.
Insurers cannot intentionally raise their declared rates just to poach clients, he added.
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