The Financial Supervisory Commission (FSC) on Thursday ordered four non-life insurance companies to raise new capital by the end of June after their capital solvency conditions worsened due to massive COVID-19 insurance policy payments.
At the end of last year, CTBC Insurance Co (中國信託產險), Fubon Insurance Co (富邦產險), Tokio Marine Newa Insurance Corp (新安東京海上產險) and Hotai Insurance Co (和泰產險) failed to meet risk-based capital (RBC) ratios, the commission said.
The FSC uses the ratio to gauge an insurer’s capital adequacy, setting 50 percent as the regulatory minimum and 200 percent as a healthy level.
Photo courtesy of Hotai Insurance Co
All four insurers’ RBC ratios fell into negative territory at the end of last year, as they suffered heavy losses due to massive compensation to COVID-19 policyholders, the commission said.
The four companies must restore their solvency levels by raising fresh capital by the end of June, or they would be taken over by the commission within 90 days, it said.
Fubon Insurance had an RBC ratio of minus-37.25 percent, while Hotai Insurance had an RBC ratio of minus-321 percent, Tokio Marine Newa Insurance minus-1,078 percent and CTBC Insurance minus-1,680 percent, FSC data showed.
Fubon Insurance’s board of directors yesterday approved a plan to issue 1 billion new common shares via a private placement, as the insurer’s accumulated losses have exceeded half of its share capital, its parent Fubon Financial Holding Co (富邦金控) said in a statement to the Taiwan Stock Exchange.
Fubon Insurance aims to raise NT$16 billion this time after a capital injection of NT$15 billion in August last year to address the problem.
Hotai Insurance plans to scrap NT$4.5 billion from its share capital to absorb losses and then raise NT$4.5 billion by issuing 450 million common shares via a private placement to improve its financial status, its parent Hotai Motor Co (和泰汽車) said in a filing to the Taiwan Stock Exchange yesterday.
Hotai Insurance last year raised NT$20 billion and NT$6 billion after two separate share issues.
Another insurer, Chung Kuo Insurance Co (兆豐產險), had an RBC ratio of minus-8.8 percent at the end of last year, but was able to restore it to 200 percent after a fresh capital injection of NT$6 billion, the commission said.
Overall, the nation’s six major non-life insurers that sold a majority of the COVID-19 insurance policies have raised fresh capital of NT$112.5 billion to increase their adequacy ratios, the commission’s data showed.
Meanwhile, Mercuries Life Insurance Co (三商美邦人壽保險) and Hontai Life Insurance Co (宏泰人壽) are required to submit plans to enhance their capital adequacy as their equity-to-assets ratio have slid below 3 percent, the commission added.
The capital inadequacy issues mark the latest challenge facing local insurers after rate hikes and tumbling stock markets.
Additional reporting by Lisa Wang
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