One key question in Taiwan's life insurance sector is whether investment projects that can generate stable cash flows and that are suitable for life insurers, can be offered up quickly, according to Dr Peng Jin-lung, the chairman of the Financial Supervisory Commission (FSC).
The Taiwanese insurance industry generates NT$1tn ($30.6bn) to NT$2tn in additional funds each year, he said in an exclusive interview with The Liberty Times. As long as there are suitable investment projects, there is a great chance for life insurers to invest trillions of NT dollars, he added.
Dr Peng said that the life insurance industry used to enjoy good and stable returns on overseas investments. However, the US hiked interest rates sharply in 2022, and the cost of hedging overseas investments soared, seriously eroding real profits. He added that the new capital system for insurers to be implemented in 2026, and the capital pressure from foreign investments have also made domestic investments more attractive to the life insurance industry.
Dr Peng said that transportation infrastructure, green energy power plants, airport runways and other public construction projects can offer stable income. Such projects can be considered for investment by insurance funds. He added that securitisation might even be considered in the future.
He indicated that the FSC could contribute to life insurers’ investment activities by modifying capital adequacy (RBC) norms, loosening investment regulations, such as those related to participating in public construction projects, and providing technical assistance in securitisation.
Domestic investment is a hot topic at present because the Executive Yuan has launched a trillion-dollar investment national development plan to guide life insurance funds to invest in public construction and infrastructure.
Dr Peng reiterated that the Cabinet’s target is attainable because Taiwan has no shortage of investment funds, but investment targets must be made available as soon as possible.