Taiwan raises insurers’ investment cap for futures funds

Regulator continues with efforts to provide insurers with wider investment options

Taiwan raises insurers’ investment cap for futures funds

Insurance News

By Gabriel Olano

Taiwan’s financial regulatory agency has relaxed the limits on how much insurers can invest in equity futures funds and futures exchange-traded funds (ETFs).

The Financial Supervisory Commission (FSC) said in a statement posted on its website that it will now allow insurers to invest up to 10% of their total assets under management (AUM) in such funds. Previously, the limit was at 1%.

The FSC also raised the maximum investable amount in a single fund to 10% of that fund’s AUM. This is double the previous limit of 5%.

According to the FSC, it raised the caps after it received and deliberated a proposal from the Chinese National Futures Association as part of industry consultations last year.

In October, the FSC linked up with various representatives across the financial industry to seek recommendations for financial reform. These recommendations were aimed at improving the financial technology (fintech) sector and giving Taiwanese insurers more investment options.

The FSC added that its Insurance Bureau looked into potential risks the changes could expose insurers to and concluded that these would be quite limited.

“Taiwan’s ETF market has become more diversified. This, coupled with ETFs’ cost effectiveness and high transparency, enables insurers to carry out asset allocation in a more flexible way,” Patrick Liao, senior vice president of the quantitative and index investment department at Fubon Asset Management Co., told Asia Asset Management.

In June, the FSC allowed insurers to invest up to 2% of total AUM in private debt funds and private real estate funds. These types of investments were previously not allowed for insurers.

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