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

11/01/2012

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According to the Financial Supervisory Commission, the "Standards and Handling Guidelines for the Verification of Immediate Utilization with Revenue of Insurance Enterprises Investment in Real Estate" (the "Guidelines") issued on 24 February 2011 have been enforced for more than 1 year; for insurance companies to align investment in real estate and utilization of investment income with efficient utilization of insurance companies' funds, and to improve insurance companies' internal procedures for investment in real estate , the said Guidelines were amended. The amended Guidelines took effect on 24 August 2012. Key points of the amendments:
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 3 quarters (0.75%). Such amendment does not apply retroactively to real estate acquired prior to the amendment;
2.	An insurance company shall manage its real estate for its own use separately from its investment in real estate based on the actual use, stipulate internal procedures as approved by the board of directors, and manage its real estate for its own use separately from its investment in real estate and calculate investment limit based on the area actually used;
3.	To strengthen corporate governance and internal procedures for investment in real estate in the insurance industry and to ensure companies in the insurance industry conduct proper assessment of investment in real estate, it is newly stipulated that where an insurance company reclassifies its investment in real estate as real estate for its own use and vise versa or sell the real estate for its own use within one year of acquisition of such real estate, it shall review the legality, appropriateness and rationality thereof and submit the same to the board of directors for approval; and
4.	When real estate acquired from enforcement of mortgage or acquired to ensure claims recovery is not classified as real estate for a company's own use, the matter shall be processed in accordance with regulations governing immediate utilization with revenue of investment in real estate.