TAIWAN Law and Practice Contributed by: Daniel T H Tsai, Lee and Li
1. Basis of Insurance and Reinsurance Law 1.1 Sources of Insurance and Reinsurance Law The legal system in Taiwan is essentially a civil law system rather than common law. The sources of insur- ance and reinsurance law can be roughly sub-divided into: • the direct source of law (also known as statutory law); and • indirect sources of law (such as past court judg- ments, practice, and expert theory). The direct source of law comes from legislation such as the Insurance Act and the Regulations for Estab- lishment and Administration of Insurance Enterprises. Moreover, in order to promote international co-oper- ation, the Taiwan government and relevant agencies may – based on the principle of reciprocity – enter into a bilateral or multilateral co-operative treaty or agree- ment with a foreign government or with an interna- tional organisation. Therefore, bilateral or multilateral treaties and agreements may also be part of the direct source of insurance and reinsurance law. 2. Regulation of Insurance and Reinsurance 2.1 Insurance and Reinsurance Regulatory Bodies and Legislative Guidance In Taiwan, insurance and reinsurance activity is regu- lated by a government agency (the Financial Super- visory Commission, or FSC) in accordance with the Insurance Act and the relevant laws and regulations. For insurers, both non-life insurance entities and life insurance entities are regulated by the FSC and need to comply with the basic principles of insurance and reinsurance – for example, the insurable interest prin- ciple and the utmost good faith principle. However, according to Article 138 (1) of the Insurance Act, insurance entities shall not concurrently engage in both non-life insurance business and life insurance business except where a non-life insurance entity is
approved by the FSC to engage in personal injury insurance and/or health insurance. Moreover, pursuant to Articles 176 and 177 of the Insurance Act, there are detailed procedures for the establishment, registration, transfer, merger, dissolu- tion and rehabilitation of insurance entities – making the insurance and reinsurance business a highly reg- ulated industry. And regulations governing the legal compliance of insurance solicitors (ie, representatives of the insurance entity) in insurance operations are set forth by the FSC in further detail and cover: • obtaining solicitor qualification certificates; • registration (including voidance or revocation of registration); • education; • training; and • disciplinary matters. Reinsurers are required to have a high autonomous management capability ‒ for example, a reinsurer must receive a credit rating above a certain level from an international credit rating agency and allocate cer- tain special reserves. However, in practice, the actual operation of reinsurance entities is less heavily regu- lated once all the permits and licences for reinsurance are obtained – given that the reinsurer is the expert and more able to self-regulate. 2.2 Writing of Insurance and Reinsurance According to Article 144 of the Insurance Act, the FSC is entitled to issue guidelines to regulate insurance and reinsurance policies as it deems necessary. As a result, the FSC has issued the Regulations Govern- ing Pre-Sale Procedures for Insurance Products, the Guidelines for the Examination of Non-Life Insurance Products, and the Guidelines for the Examination of Life Insurance Products. Whether consumer insurance, SME insurance or cor- porate insurance, insurance entities are required to comply with the applicable guidelines and submit the insurance products for the FSC’s review and approval before such products can be made available to the Taiwan market. Besides, in order to ensure the sound- ness of the insurance market or safeguard the inter-
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