Taiwan: Regulator limits insurers' investments in global corporate bonds
Source: Asia Insurance Review | Mar 2017
Taiwan’s financial regulator is curbing investments by domestic insurers in international corporate bonds redeemable by issuers within five years, as it moves to clamp down on risk. The new rule is set to take effect on 25 March 2017.
Taiwan has previously sought to attract such bond listings to boost the global competitiveness of its capital markets, drawing in major international companies, including computer maker Apple and telecoms firm AT&T, reported Reuters. Taiwan’s insurers had invested NT$2.498 trillion (US$78.8 billion) in bonds of this kind by November, regulator data shows.
Most of these bonds mature in one to seven years, but issuers have often exercised the option to redeem them early, provoking concern by the Financial Supervisory Commission that this could jeopardise the stability of investments.
The regulator, which initially proposed barring investments in bonds with a six-year timeframe for redemption, has decided on five years instead.
The insurance industry had sought that the curbs cover bonds redeemable within three years, however.
In the meanwhile, global issuers are rushing to Taiwan before the rule change that will effectively prevent them from offering securities with call dates of less than five years.