The Financial Supervisory Commission (FSC) has reservations about a proposed amendment to the insurance law, submitted by a lawmaker, to slash the overseas investment ceiling of the insurance industry from the current 45% to 25%. The draft amendment does not provide for a transitional period in which the change would be effected.
Dr Peng Jin-lung, FSC chairman, said that when the amendment is passed, the life insurance industry would have to reallocate funds of around NT$9tn ($276bn) from overseas to the domestic market, reported the Central News Agency.
Dr Peng was addressing the Finance Committee of the Legislative Yuan last week to deliver a special report on "How to Promote Extending the Participation of Insurance Industry Funds to Public Construction and Accelerate the Promotion of Construction". The Finance Committee is reviewing draft amendments to the insurance law.
He said that as much as 70% to 80% of insurers’ overseas investments are in foreign bonds. He added that the insurers’ objective of investing in overseas long-term bonds is to hold them until maturity to obtain stable returns. If they have to sell the overseas bonds within a short time, the impact will be severe and the losses to the insurers will be huge.
He urged lawmakers not to pass the proposed amendment.