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Taiwan's life insurers encouraged to buy shares instead of realty.

Taipei, Nov. 28, 2012 (CENS) -- To prevent life insurers from investing in the heated real estate market, Taiwan's Financial Supervisory Commission (FSC) has recently raised the risk-based capital (RBC) index of real estate invested by life insurers to 0.0781 from 0.0744, calling for life insurers to raise capitalization by 5%.

An FSC official explained that RBC index represents an amount based on risk assessment that a company should hold to protect customers from adverse developments.

If property or land owned by life insurers hasn't been productively used for a while, their RBC index must be raised to 40% from the current 30%, the official added.

However, FSC has eased limitation on investments by insurers on the stock market, public constructions, as well as overseas property market.

Insiders said that the new policy might encourage life insurers to buy more shares in the stock market to hold for longer term rather than for quick returns.

Currently stocks held by domestic life insurers bought from the stock market exceed NT$870 billion (US$29 billion), accounting for 6.9% of their usable funds, much lower than the corresponding 20%-30% of counterparts in the United Kingdom. Raising the percentage by three to eight points will take their investment in the stock market higher by NT$400 billion (US$13.33 billion) to over NT$1 trillion (US$33.33 billion).

Cathay Life Insurance co., Shin Kong Life Insurance Co., Taiwan Life Insurance Co., and China Life Insurance Co. would benefit from being allowed to remit more capital to invest in real estate markets abroad.

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Article Details
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Author:Li, Judy
Publication:The Taiwan Economic News
Article Type:Brief article
Geographic Code:9TAIW
Date:Nov 28, 2012
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