Gov’t may take over insurance companies: FSC
Insurance companies without a solid finance structure could be acquired by the government immediately if no improvement measures are made, warned Tseng Mingchung ( ), chairman of the Financial Supervisory Commission (FSC), yesterday.
The comment was made to discourage undercapitalized insurers from taking chances before next year, when the Prompt Corrective Action effect.
The PCA mandates penalties against institutions that exhibit deteriorating capital ratios. Starting on Jan. 1, 2016, the government will have the power to take over insurers with a risk-based capital ratio of less than 50 percent.
Tseng’s remark, however, is an indication that the government does not have to wait until next year to take over underperforming companies. The
(PCA) is set to be put into Insurance Act already stipulates that crumbling insurers that are unable to protect customer interests may be acquired by the government.
There is no such “window of opportunity” before the end of the year, Tseng warned, adding that insurers with a weak financial structure can still be taken over.
According to Tseng, Chaoyang Life ( ) is at the center stage this insurance melt-
of down. Nevertheless, considering the interests of the company’s stakeholders, the FSC’s Insurance Bureau is only requesting that Chaoyang raise capital to “prevent it from getting worse,” said Tseng, who added that the company’s operation has now improved.
Acquisition Necessary to Protect
The FSC chief made the comment at the Legislative Yuan yes- terday, where lawmakers including Democratic Progressive Party Legislator Wu Ping-jui ( ) and Kuomintang Legislator Alex Fai ( ) questioned the rational behind the government acquiring failing insurers.
The FSC took over Singfor Life ( ) and Global Life Insurance ( ) in March, and then sold it at a loss of NT$ 30.3 billion to Cathay Life Insurance ( ) . The maneuver drew much criticism from the public, who argued that the loss should not be burdened by taxpayers.
In the government’s defense, Tseng said the acquisition was necessary to protect consumer interest. Without the take over, the two insurers were bound to fall into a worse financial state, which would further raise the government’s acquisition prices.
The two insurers had about 500,000 customers, and their bankruptcy would hurt consumer interest directly. Taiwan society is not yet at such a mature state that it can witness an evaporation of interest and rights belonging to some 500,000 consumers who have paid premiums for decades, said Tseng, who added that the insurers’ collapse would make financial waves.
The two insurers had negative asset value as early as 2005 and 2006, and they could have been acquired much earlier, based on local regulations, Tseng said.