FSC Grants Capital Calculation Flexibility to 8 Financial Holding Companies to Align with Insurance Industry TIS

The Financial Supervisory Commission (FSC) announced on the 28th that it plans to amend the 'Regulations Governing the Consolidated Capital Adequacy of Financial Holding Companies.' This amendment will allow eight financial holding companies with insurance subsidiaries to apply capital calculation flexibility, enabling them to include capital-nature bond premiums in their capital base and amortize them over a 15-year transition period. Furthermore, 11 financial holding companies with insurance subsidiaries will be granted a one-month extension for filing their capital adequacy ratios (CAR), starting with this year's semi-annual reports, a move seen as easing capital pressure on these firms.

The FSC stated that the insurance industry is transitioning to the new Taiwan Insurance Solvency (TIS) regime this year, which includes a 15-year transition period. The FSC plans to announce the draft amendments for a 30-day public comment period.

Chang Chia-kuei, Deputy Director-General of the Banking Bureau, explained that the amendment has two main objectives. First, considering the complexity of the new insurance regime, the deadline for reporting capital-related information will be extended until 2028. Second, financial holding companies can extend their CAR filing deadline from the end of August to the end of September to align with their insurance subsidiaries.

Additionally, the FSC will allow financial holding companies to calculate group capital adequacy based on the qualified capital and statutory capital requirements of their insurance subsidiaries under the 'Notes on Selective Transitional Measures for Insurance Industry Own Capital and Risk Capital.' This allows for the temporary exemption of capital-nature bond premiums that would otherwise be deducted, with the deduction phased in over the 15-year transition period.

The Banking Bureau provided an example: if a life insurance subsidiary applies for transitional measures and has 15 billion TWD in capital-nature bond premiums, previously only half (7.5 billion TWD) could be counted as own capital. Starting this year, the full 15 billion TWD can be counted, with the 7.5 billion TWD difference phased out over 15 years. The 11 eligible financial holding companies include Fubon Financial, Cathay Financial, CTBC Financial, and others.