By Kao Shih-ching / Employees reporter
The Monetary Supervisory Fee (FSC) is reviewing Shin Kong Life Insurance coverage Co’s (新光人壽) software to make use of fair-value accounting to evaluate its funding properties, the fee stated on Thursday.
The transfer got here after Shin Kong Monetary Holding Co’s (新光金控) board of administrators on Could 22 permitted the insurance coverage unit’s proposal to make use of fair-value accounting fairly than price accounting to evaluate non-self-use properties.
Truthful-value accounting estimates actual property based mostly on market value, whereas the fee technique calculates property based mostly on their authentic price.
“Life insurers would need our approval if they want to adopt different accounting standards. Shin Kong Life has filed its application, and we are still reviewing its documents,” Insurance coverage Bureau Deputy Director-Basic Wang Li-hui (王麗惠) informed a information convention in New Taipei Metropolis.
Wang didn’t say when the fee would full its overview.
The proposed change got here after the life insurer noticed its equity-to-asset ratio drop to 2.33 % as of the top of March, beneath the fee’s requirement of three %.
The regulator displays life insurers’ equity-to-asset ratio twice a 12 months: on the finish of June and on the finish of December.
If an insurer’s equity-to-asset ratio stays beneath three %, the fee can restrict their operations the next 12 months, in line with the Insurance coverage Act (保險法).
Shin Kong Life hopes that its web worth will develop utilizing the brand new accounting technique.
Through the use of fair-value accounting, the value of Shin Kong Life’s non-self-use actual property would rise to NT$186.three billion (US$6.2 billion), NT$53.5 billion increased than the NT$132.eight billion it estimated utilizing price accounting, Shin Kong Monetary informed an buyers’ convention on Thursday.
Shin Kong Life additionally plans to guide NT$46.eight billion of the rise in its web worth, which might elevate its equity-to-asset ratio by 1.5 share factors, climbing above three %, it stated.
“It would be fairer to compare our net worth with those of other peers, as other major life insurers have adopted the fair-value method,” Shin Kong Monetary senior vice chairman Sunny Hsu (徐順鋆) stated by phone.
5 main insurers have adopted the fair-value technique — Cathay Life Insurance coverage Co (國泰人壽), Fubon Life Insurance coverage Co (富邦人壽), Nan Shan Life Insurance coverage Co (南山人壽), China Life Insurance coverage Co (中國人壽) and Mercuries Life Insurance coverage Co (三商美邦人壽) — in line with the fee.
“The shortcoming is that the value would be more volatile due to market conditions, and we need to hire experts to appraise the value every quarter,” Hsu stated.
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