Taiwan loosens rules on PE investment by insurers

Insurers that have invested over 40% of their total assets overseas could be allowed to invest up to 3% of their total assets in PE and hedge funds, up from the current limit of 2%. The revision was made because of the rapid development and maturation of the international alternative investment market that could help improve the efficiency of capital deployment by Taiwanese insurance companies, according to a filing.

In addition, the regulator also expanded the number of countries from which GPs can invest in Taiwan. Previously overseas GPs had to be registered in one of the 36 Organization for Economic and Development (OECD) countries; under the new rules a firm registered in any of the 121 countries and regions that have signed on to the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMOU) may operate in Taiwan, as long as it has a rating of A+ or above by international rating agencies.

The MMOU is a policy framework that requires signatories to reach a common understanding of how they should consult, cooperate, and exchange information for the purpose of regulatory enforcement regarding securities markets. It is managed by the International Organization of Securities Commissions, a global association of organizations that regulate the world's securities markets, including the China Securities Regulatory Commission.

“Countries and regions like Hong Kong and Singapore which are not OECD countries are widely believed to have reached the standards of developed regions. As such, we have decided to revise the rules in a bid to improve the flexibility of the use of insurance capital,” the FSC said in its filing.

The rule change comes after years of reluctance on the part of Taiwanese authorities to expand the role of private equity despite the eagerness of insurers to invest in the asset class in a low-interest environment. The 2% limit, relatively small compared to other developed markets where insurers can allocate as much as 10% to private equity, has long been a barrier to participation.

The FSC announced in 2017 that mutual fund managers in Taiwan would be allowed to set up onshore vehicles for PE investments, and that it would encourage PE funds to invest in infrastructure, green energy, assisted living facilities, and other innovative businesses that can boost the island's real economy.

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• Topics
• Greater China
• LPs
• Regulation
• Taiwan (China)
• insurance