Gov’t may take over in­sur­ance com­pa­nies: FSC

The China Post - - TAIWAN BUSINESS - BY JOHN LIU

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

Con­sumer In­ter­est

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.

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