Shin Kong Financial Holding Co (新光金控) yesterday said that its insurance unit would adjust its investment portfolio after being banned from buying new stocks a day earlier by the Financial Supervisory Commission (FSC).
“We will research what we can do based on the commission’s specific instructions after we receive the regulator’s formal documents,” Shin Kong Financial spokesman Sunny Hsu (徐順鋆) told the Taipei Times by telephone.
The commission on Tuesday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$941,722) for reckless investment, and demanded that the insurer reduce its overseas investment ratio from 43 percent to 39 percent.
The fine would affect the insurer’s return on investment, but rising sales of foreign currency-denominated policies would help offset any negative effects, Hsu said.
Insurance companies are allowed to use foreign funds generated from their foreign currency-denominated policies to invest overseas without any restrictions, as there are no foreign exchange risks.
First-year premiums from foreign currency products totaled NT$32.24 billion for the first six months, making up 73.9 percent of all first-year premiums, the highest level Shin Kong Life has ever reported, company data showed.
The insurer cannot buy new local stocks until it lowers its overseas investment ratio, and Hsu said it remains unknown how long it will take for the ratio to drop to 39 percent.
Shin Kong Life had a pool of NT$3.02 trillion investment funds as of the end of June, with a recurring yield of 3.32 percent.
As Shin Kong Life chairman Eugene Wu (吳東進) was suspended by the commission on Tuesday, Shin Kong Financial chairman Victor Hsu (許澎) is to fill in for him as a board member, the insurer said in a filing to the Taiwan Stock Exchange (TWSE), adding that it has not yet appointed a new chairperson.
The commission on Tuesday also demanded that Shin Kong Life set up a better mechanism for its asset and liability management committee as it was responsible for the reckless investment decisions.
The committee did not hold meetings frequently and basically gave guidelines to the firm’s investment team, Hsu said, without saying whether it would be abolished or overhauled.
The commission’s press release announcing the Shin Kong Life fine reached more than 11,000 page views as of press time last night, a relatively high number for a government press release.
“All insurers are studying what mistakes Shin Kong made, trying to improve themselves to avoid a similar penalty,” Peng Jin-lung (彭金隆), chairman of National Chengchi University’s department of risk management and insurance, said by telephone.
As major insurance companies are running more internal committees to manage matters, the regulator is paying more attention to whether the committees’ power matches their responsibility and accountability, and whether companies have solid self-control measures in place, Peng said.
The commission’s regulations on insurance companies are likely to become more strict, as insurers have more money from the public and a bigger influence on capital markets, he added.
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