The Financial Supervisory Commission (FSC) of Taiwan has issued a statement stating that the reclassification of financial assets by the insurance industry to increase net equity must be handled in accordance with both IFRS 9 and the reference guidelines of the accounting body, the Accounting Research & Development Foundation.
According to a statement issued by the FSC on October 11th, the regulator will also demand the establishment of a separate surplus reserve.
As expected, the FSC stated that Nan Shan Life Insurance would reclassify its financial assets in an effort to strengthen the company's financial position. Soon, at least three additional regional life insurers will join them.
According to a statement released by the insurer, cited by The Taipei Times, the asset reclassification is expected to increase Nan Shan Life's net equity by more than NT$300bn ($9.4bn) and push its equity-to-asset ratio, a solvency gauge, to more than 5% at the end of this month, up from minus 0.59% at the end of last month.
Nan Shan Life added in the statement, "Our reclassification under IFRS 9 would be backdated to 1 October, and our net equity would no longer be affected by the changes in rates significantly."
Nan Shan Life has said that it is financially stable and solvent, and that its policyholders' rights will remain unaffected by the current market uncertainty.
FSC chairman Thomas Huang told a hearing of the Finance Committee of the Taiwanese legislature that the FSC expects Cathay Life Insurance, China Life Insurance, and PCA Life Assurance to reclassify their assets to improve their financial picture, following in the footsteps of Nan Shan Life.
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