TAIWAN Law and Practice Contributed by: Daniel T H Tsai, Lee and Li
• management guidelines for the method of cession; • arranging cession to the reinsurer once the original insurance policy is in force; and • choice of reinsurer, reinsurance broker and opera- tional process for cession to the reinsurer. Moreover, according to Article 10 of the aforemen- tioned regulation, the reinsurance premium rates shall be adequate, reasonable, and reflect costs. If a non- life insurance entity arranges proportional reinsurance, the retention premium rate shall not be lower than the reinsurance premium rate and original premium rate. However, if a non-life insurance entity arranges non- proportional reinsurance, none of the retention-layer premium rates may be lower than the higher-layer premium rate or the weighted average reinsurance premium rate of the same layer. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies When it comes to the M&A of insurance companies in Taiwan, the FSC focuses on protecting the rights of shareholders and investors, and the disclosure of relevant information. In general, if the insurance company can meet rel- evant insurance regulations and be approved by the FSC, M&A activities are allowed in Taiwan. However, in order to ensure that M&A activities of life insurance companies do not interrupt the service provided to the insured, the FSC may require the life insurance company to: • issue a statement promising that the rights and interests of the original insured will not be affected in any way; and • take the initiative to send a letter to notify those already insured. Moreover, according to Article 5 of the Financial Insti- tutions Merger Act, if a property insurance company is merged with an insurance co-operative, the surviving institution or newly incorporated institution shall be the property insurance company. When an insurance company is merged, it shall make a public announce-
ment and report within two days from the occurrence of the merger and make a public announcement of the content of the resolution and particulars to be stated in the merger agreement within ten days (Article 9 of the Financial Institutions Merger Act). In practice, if the merger or acquisition is relatively complicated, the FSC may require the insurance com- pany to, inter alia, provide more capital or have more of an ability to integrate the different information sys- tems. 5. Distribution 5.1 Distribution of Insurance and Reinsurance Products In Taiwan, insurance is categorised into non-life insurance and personal insurance. Non-life insurance includes fire insurance, marine insurance, land and air insurance, liability insurance, bonding insurance, and any other type of insurance approved by the compe- tent authority. Personal insurance includes life insur- ance, health insurance, personal injury insurance, and annuities. The following types of distributors are active in the market in Taiwan: • insurance agent – a person who, on the basis of a contract of agency or a letter of authorisation, collects remuneration from an insurer and acts as a business agent on the insurer’s behalf; • insurance broker – a person who, on the basis of the interests of the insured, negotiates an insur- ance contract or provides related services and collects a commission or remuneration; and • insurance solicitor ‒ a person who acts as the indi- vidual representative of insurance entity in order to solicit insurance business on behalf of: (a) said insurance entity; (d) a bank concurrently engaged in insurance agent/insurance broker business operations. According to Article 163 of the Insurance Act, an insurance broker and agent must have obtained per- (b) an insurance broker company; (c) an insurance agent company; or
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