TAIWAN Law and Practice Contributed by: Daniel T H Tsai, Lee and Li
Association”)/the Non-Life Insurance Association of the Republic of China (the “Non-Life Insurance Association”) in Taiwan; and • apply for the issuance of a certificate to operate a foreign exchange business (“FX Licence”) from the Central Bank of the Republic of China (Taiwan) (CBC) if the new company intends to sell insurance policies that are denominated in foreign currency. In summary, a foreign insurance entity may not com- mence its business operation in Taiwan unless it has obtained a special permit from the FSC, complet- ed establishment registration, posted a bond, and secured a business licence in accordance with the law (based on Article 137 (3) of the Insurance Act). Doing business illegally in Taiwan may result in the responsible person at the offending insurance/reinsur- ance entity being held criminally liable per Article 167 and Article 167-1 of the Insurance Act. It usually takes between at least six to eight months to obtain a special permit and such permit is at the discretion of the authority, making it difficult to com- ment on the chances of overseas licences being rec- ognised, etc, given that the uncertainty thereof is so high. Moreover, there is a minimum paid-in capital requirement that the promoters (ie, the shareholders who subscribe to company shares in the initial sub- scription) must contribute the equivalent of at least 20% of the minimum paid-in capital at the time of registering the company’s establishment. In addition, a bond equal to 15% of the paid-in capi- tal should be deposited with the National Treasury. Then, within three months of registering its establish- ment, the insurance enterprise must submit the docu- ments stipulated under Article 11 of the Regulations for Establishment and Administration of Insurance Enterprises and apply to the FSC for the business licence, which would usually take between one and two months. Nevertheless, this time schedule is for reference only, and the actual time required is decided on a case-by- case basis. Furthermore, the permission of the Central Bank must be obtained first if the business involves foreign exchange business.
Foreign insurers or overseas-based insurers that have not completed the above-mentioned registration pro- cess and deposited the sum of the operating bond cannot write insurance business directly in Taiwan. However, the FSC allows foreign or overseas-based insurers or reinsurers to write reinsurance with a domestic insurer to a certain extent without punish- ment under Articles 167 and 167 (1) of the Insurance Act. To enhance the insurance rights of consumers, the FSC has also permitted consumers to purchase insur- ance from foreign insurance companies through insur- ance brokers provided that such insurance is con- sistent with Taiwan government policy and has been announced by the FSC or another relevant competent authority. 3.2 Fronting According to Article 7 of the Regulations Governing Insurance Entities Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms, if an insur- ance entity would like to cede its insurance business then the undertaking insurance entity must be one of the following: • an insurance entity approved by the competent authority to engage concurrently or exclusively in reinsurance business in Taiwan; • a foreign insurance entity approved by the compe- tent authority to engage concurrently or exclusively in reinsurance business in Taiwan; • a foreign reinsurance or insurance organisation with a credit rating above a certain level from an international credit rating agency; • a reinsurance organisation, insurance organisation or risk-spreading mechanism allowed to engage in reinsurance business according to the laws of Taiwan; or • other reinsurance organisations, insurance organi- sations or risk-spreading mechanisms approved by the competent authority. Such ceding insurance entity must also establish its own risk management mechanism for its ceded rein- surance business, taking its risk-bearing capacity into consideration, and draft a reinsurance risk manage- ment plan that should include:
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