The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision.
The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said.
In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee on investment decisions, without any checks, Insurance Bureau Director-General Shih Chiung-hwa (施瓊華) told a news conference in New Taipei City.
Photo: Kao Shih-ching, Taipei Times
The committee, led by Wu, increased its investment by NT$96.66 billion in several US stocks and exchange-traded funds in two consecutive days in January, ignoring warnings from the insurer’s risk management department, Shih said.
However, as US stocks tumbled, the insurer’s value-at-risk, a measure of the risk of investment loss given market conditions, increased to 43.33 percent by the end of March 27, which was 2.75 times higher than the 15.73 percent limit set by the insurer’s board members, Shih added.
The investment also caused the insurer’s equity-to-asset ratio, a key solvency gauge, to fall to 2.2 percent as of the end of March, below the regulatory minimum of 3 percent, she added.
“Even though the firm’s risk-based capital ratio dropped below the board member’s goal of 250 percent, the committee did not discuss how to improve it. There were no minutes of the committee’s meetings, which indicates poor internal controls,” Shih said.
Wu, who should have ensured the firm’s financial strength and solvency, on the contrary weakened them by allowing the committee not to report to the board of directors and appointing more than half of the committee’s 16 members, so the commission suspended his chairmanship and barred him from becoming a board member until his term ends in June 2023, she said.
“We expect the insurance company to get back on track by overhauling its mechanisms for investment and risk management while Wu is absent,” Shih said.
The commission also dismissed Shin Kong Life vice president and chief investment officer James Yuan (袁宏隆), as he ignored risks by taking on fixed-income stocks with poor liquidity, asking the firm’s research team to revise reports so that the investment team could invest in targets and make at-the-close orders in the local stock market to boost its asset valuations.
The commission said that it has lowered the insurer’s ratio of overseas investment to a total investment of 39 percent, from 43 percent, which means that the firm can only sell its foreign assets and cannot buy any new targets until the ratio drops, it added.
The commission did not set a deadline for Shin Kong Life to trim the ratio, but demanded that it not buy any local or foreign stocks and exchange-traded funds before the adjustment is completed, Shih said.
TARIFFS: The global ‘panic atmosphere remains strong,’ and foreign investors have continued to sell their holdings since the start of the year, the Ministry of Finance said The government yesterday authorized the activation of its NT$500 billion (US$15.15 billion) National Stabilization Fund (NSF) to prop up the local stock market after two days of sharp falls in reaction to US President Donald Trump’s new import tariffs. The Ministry of Finance said in a statement after the market close that the steering committee of the fund had been given the go-ahead to intervene in the market to bolster Taiwanese shares in a time of crisis. The fund has been authorized to use its assets “to carry out market stabilization tasks as appropriate to maintain the stability of Taiwan’s
STEEP DECLINE: Yesterday’s drop was the third-steepest in its history, the steepest being Monday’s drop in the wake of the tariff announcement on Wednesday last week Taiwanese stocks continued their heavy sell-off yesterday, as concerns over US tariffs and unwinding of leveraged bets weighed on the market. The benchmark TAIEX plunged 1,068.19 points, or 5.79 percent, to 17,391.76, notching the biggest drop among Asian peers as it hit a 15-month low. The decline came even after the government on late Tuesday authorized the NT$500 billion (US$15.2 billion) National Stabilization Fund (國安基金) to step in to buoy the market amid investors’ worries over tariffs imposed by US President Donald Trump. Yesterday’s decline was the third-steepest in its history, trailing only the declines of 2,065.87 points on Monday and
TARIFF CONCERNS: The chipmaker cited global uncertainty from US tariffs and a weakening economic outlook, but said its Singapore expansion remains on track Vanguard International Semiconductor Corp (世界先進), a foundry service provider specializing in producing power management and display driver chips, yesterday withdrew its full-year revenue projection of moderate growth for this year, as escalating US tariff tensions raised uncertainty and concern about a potential economic recession. The Hsinchu-based chipmaker in February said revenues this year would grow mildly from last year based on improving supply chain inventory levels and market demand. At the time, it also anticipated gradual quarter revenue growth. However, the US’ sweeping tariff policy has upended the industry’s supply chains and weakened economic prospects for the world economy, it said. “Now
An employment discrimination lawsuit against contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) might soon be expanded after a hearing in a federal court in San Jose, California, on Tuesday to add 15 plaintiffs to the case. According to a court document, the lawsuit, which was refiled in November last year as a form of a class action with 13 plaintiffs in California, wants to add 15 plaintiffs from Arizona, where TSMC is building up its wafer fab capacity. TSMC first committed between 2020 and last year to invest US$65 billion in three advanced wafer fabs in Arizona. It then pledged an
RSS