Taiwan: Regulator wants life insurers to hold more fixed income assets
Source: Asia Insurance Review | Apr 2018
The Financial Supervisory Commission (FSC) has said that regulators would work toward deregulation to revive the appetite of local fixed-income investors – mainly insurers’ – for structured-finance products.
Life insurers’ positions in fixed-income assets have fallen to alarmingly low levels compared with their peers abroad, the FSC said. Fixed-income assets make up less than 20% of local life insurers’ total investments, while they make up between 80% and 90% of the portfolios of their peers abroad, FSC Vice Chairman Cheng Cheng-mount said in March, according to a report in The Taipei Times.
Local life insurers have trimmed their government bond holdings to 8% at the end of last year from a historical average of 10%, Mr Cheng said.
While foreign life insurers usually make the bulk of their investments in government debt issued in their home markets, many local life insurers have increased their overseas investments to levels close to the regulatory ceiling, he said.
“We are concerned about the decline in bond investments by local insurers, as the trend suggests that the domestic market is lacking viable fixed-income products,” he added.
To address the issue, the Commission is mulling easing regulations to stimulate investors’ interest in domestic real estate investment trusts (REITs), which have been neglected in recent years due to lower expected returns, he said.
The FSC is considering easing listing requirements for REITs to encourage the participation of real estate companies, Mr Cheng said, adding that the scope of the instrument would also be broadened to include “green” energy investments, such as wind farms. The FSC may raise the amount of funds that may be directed into property development projects by private placement REITs from 30% to 100%, he said. A