In the News

Insurers may soon invest in mainland securities

• Publication Date：05/13/2010
• Source： Economic Daily News

The Financial Supervisory Commission, Mainland Affairs Council and relevant agencies arrived at a consensus May 12 on allowing domestic insurance firms to invest in mainland Chinese securities.

Under the consensus, initial targets would be limited to corporate bonds and listed stocks of high liquidity and steady yields, FSC officials said. Private securities reportedly will not be included.

Officials said as revisions to existing regulations are required, the actual relaxation of the investment rules is expected in the first half of this year, at the earliest.

Meanwhile, the maximum amount that an individual Taiwan insurance firm would be allowed to invest in the mainland would be capped at 10 percent of the company’s total allowable overseas investments. This would translate into investment of around NT$300 billion (US$9.4 billion) to NT$400 billion.

Currently, Taiwan insurance companies have about NT$ 10 trillion in investment funds.

The inter-ministerial conclusion was arrived at during a review of draft amendments to the Insurance Act by the Legislature’s Finance Committee. During the occasion, lawmakers expressed concern about insurance companies’ investment practices.

FSC Minister Sean Chen said the commission has already been in communication with related agencies regarding the proposed relaxation of restrictions and that no agency, including the MAC, has voiced any significant opposition to the plan. However, he added that many matters still had to be worked out before it could be finalized.

He noted that the FSC has been mainly coordinating with the MOEA on the details of the plan as the ministry will have to amend related regulations to allow it to materialize. It could be implemented by the end of the second quarter of this year at the earliest, he added.

Officials said the upper limits on authorized overseas investment by domestic insurance companies are not the same for each firm, with the average proportion being roughly 30 percent of their investment funds.

If these companies are granted approval to invest up to 10 percent of their allowable overseas investments in mainland China, this will translate into roughly more than NT$300 billion in total, they said.

The officials noted that according to mainland Chinese law, insurance companies that want to invest in mainland securities must first qualify as qualified foreign institutional investors.

As for real estate investment in the mainland, the FSC said because the issue is complicated, it is still consulting with the MAC and other related agencies to hear their opinions on the matter and has yet to formulate a clear policy. (SB)