Further Amendment to the "Standards and Handling Guidelines for the Verification of Immediate Utilization with Revenue of Insurance Enterprises Investment in Real Estate"

01/01/2013

---

On 23 November 2012, the Financial Supervisory Commission (FSC) amended the "Standards and Handling Guidelines for the Verification of Immediate Utilization with Revenue of Insurance Enterprises Investment in Real Estate" (the "Guidelines") Insurance company previously amended on 24 August, effective from 19 November 2012. Main points of the amendment:
1.	The annualized return of an investment in real estate shall be no less than the floating interest rate applicable to the 2-year Term Postal Certificate of Deposit of Small Amount announced by Chunghwa Post Co., Ltd., plus 1.5%. Such amendment does not apply retroactively to real property acquired before 19 November 2012.
2.	All real property acquired after 19 November 2012 by insurance enterprises shall conform to the newly amended Guidelines and ownership of such real property shall not be transferred within five years upon acquisition. However the aforesaid restriction does not apply to the following circumstances: (1) circumstances set forth under section 1 of Article 143 of the Insurance Act, and (2) having obtained approval from the competent authority for exemption in order to improve the ratio of total adjusted net capital to risk-based capital.
3.	Regarding investment in vacant lands which conform to the newly amended Guidelines, an insurance company should obtain, in addition to the construction license, a "lease letter of intent" or similar qualification documents to prove the development plan will conform to the newly amended Guidelines. Work on such lands shall be completed within five years from the date of acquisition and land titles in such lands shall not be transferred within ten years from the date of acquisition. However the aforesaid restriction does not apply to the following circumstances: (1) circumstances set forth under section 1 of Article 143 of the Insurance Act, and (2) having obtained approval from the competent authority for exemption in order to improve the ratio of total adjusted net capital to risk-based capital.
4.	The aforesaid restriction is not applicable to investment in the right of superficies in government-owned lands acquired for infrastructure projects, provided that an insurance company shall report development plan for the aforesaid lands to the FSC for approval within ten days upon acquiring such right.
5.	For real property investment, an insurance company shall submit each deal to its board of directors for approval and subsequently proceed with the investment as authorized. An insurance company whose capital adequacy ratio exceeds 200% is exempted from the foregoing restriction for any single transaction below NTD300 million.
6.	For real property acquired before the effective date of these amendments and failing to meet the immediate utilization criteria, an insurance company shall file a report to the FSC for approval of special case and apply for extension two months before the expiry of the two-year period.
7.	Ownership of real property which have been recorded from investment property to be owner-occupied property is not allowed to be transferred within five years from the date of transfer.
8.	Insurance enterprises shall not invest in any buildings and structures under construction.