The Financial Supervisory Commission (FSC) will introduce an additional phase of localisation and transitional measures in the adoption process of TW-ICS (Insurance Capital Standard), to facilitate insurers' smooth integration of the TW-ICS that is to be implemented with effect from 2026.
Dr Peng Jin-lung, the FCS chairman said last week that there would be a fourth phase in the transition process. The new phase is expected to be finalised in November 2024 to allow the insurance sector a one-year preparation period.
It is understood that in the fourth phase, the risk coefficients for investments in public buildings and infrastructure and Taiwanese stocks would be adjusted, according to a report by United Daily News.
The current risk coefficient for the insurance industry's investment in public buildings is 1.28%. Two other two major types of public buildings and infrastructure will be included in the review. These are: 1) the life insurance industry invests 100% in public buildings and infrastructure through venture capital or private equity funds, and the coefficient is 10.18%, and 2) investments in public buildings and infrastructure in the Five+Two Innovative Industries Industrial Innovation plan and the Six Core Strategic Industries, the risk coefficient for which is 17.25%.
The risk coefficient of the insurance industry’s investment in Taiwanese stocks is 21.65% at present.
When the risk coefficients of the two major types of public buildings and infrastructure and Taiwanese stocks are lowered, the risk capital that insurers are required to maintain will be reduced. This will ease the pressure on the industry to increase capital. Risk coefficients will be calculated using Taiwan data.
The FSC expects that there will be another review of risk factors given that the implementation date of the ICS is 1.5 years away.
The FSC has so far outlined three phases for the life insurance industry’s integration of the ICS. The sector has been granted a transition period of 15 years to meet ICS targeted values. For instance, the current risk coefficient of the insurance industry's investments in Taiwanese stocks is 21.65%. After 15 years, it is to be 35%.