Nan Shan Life Insurance Co (南山人壽) is to reclassify its financial assets in a bid to improve its financial strength, with three more local life insurance companies likely to follow suit in the near term, the Financial Supervisory Commission (FSC) said yesterday.
The asset reclassification is expected to boost Nan Shan Life’s net equity by more than NT$300 billion (US$9.42 billion) and push up its equity-to-asset ratio, a solvency gauge, to more than 5 percent at the end of this month, up from minus-0.59 percent at the end of last month, the company said in a statement on Tuesday.
“Under the International Financial Reporting Standards 9 (IFRS 9), our reclassification would be backdated to Oct. 1, and our net equity would no longer be affected by the changes in rates considerably,” Nan Shan Life said in the statement.
Photo courtesy of Nan Shan Life Insurance Co
Nan Shan Life said it is confident about its cash flow and solvency, adding that the rights of its policyholders would not be affected by the volatility in global financial markets.
After Nan Shan Life, Cathay Life Insurance (國泰人壽), China Life Insurance Co (中國人壽) and PCA Life Assurance Co (保誠人壽) are expected to reclassify their assets to boost their financial profile, FSC Chairman Thomas Huang (黃天牧) told a meeting of the legislature’s Finance Committee yesterday.
Lawmakers criticized Huang and the commission for allowing insurance companies to reclassify their assets, saying the move is an attempt by insurers to “window-dress” their financial statements, which is likely to lead to a loophole in financial oversight.
Democratic Progressive Party (DPP) Legislator Kuo Kuo-wen (郭國文) suggested the FSC consult with the International Accounting Standard Board on whether reclassification is legal under IFRS9, as the issue has caused a controversy in Taiwan.
DPP Legislator Kao Chia-yu (高嘉瑜) demanded that Huang promise that Nan Shan Life would not be vulnerable to a financial crisis over the next five years.
Huang said he would supervise the insurer closely every day during his tenure.
He added that the decline in the net equities of life insurers was not due to operational problems, but the rapid rate hikes by central banks.
As the four life insurers have more than 17 million policyholders, allowing them to reclassify their assets should reassure policyholders, Huang said.
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