Local life insurers would be allowed to reclassify their financial assets under the International Financial Reporting Standards 9 (IFRS 9) to reflect the effects of rate hikes on their liabilities, the Financial Supervisory Commission (FSC) said yesterday.
The move is also expected to help insurers mitigate the effects on their financial gauges of aggressive rate hikes by the US Federal Reserve, especially the equity-to-asset ratio, the commission said.
The commission made the announcement after the Accounting Research and Development Foundation on Thursday approved a proposal to reclassify assets.
Photo: Kelson Wang, Taipei Times
“The FSC respects the accounting foundation’s decision and we will let insurance companies to decide themselves whether to reclassify financial assets,” Insurance Bureau Deputy Director-General Thomas Chang (張玉煇) told an online news conference. “The management and the accountants should explain explicitly the necessity of reclassification, and make announcement in advance.”
The commission would also require insurers to set up special reserves if they plan asset reclassifications to maintain a solid financial profile, Chang said.
Insurers can reclassify their financial assets from this month, the commission said.
Seven life insurers reported that their equity-to-asset gauges dropped below the 3 percent minimum as investment values plummeted amid rate hikes.
Insurers including Cathay Life Insurance Co (國泰人壽) last week said rate hikes affected their assets and liabilities, but the accounting rules only enabled them to reflect the impact on assets.
The commission yesterday also said that the tighter IFRS 17 would take effect in Taiwan in 2026, allowing time for local insurers to adjust their accounting, actuarial, investment and risk control systems.
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