TAIWAN Trends and Developments Contributed by: Robin Chang, Sarah Wu and Eddie Hsiung, Lee & Li
continue to assess the feasibility of reopening applications for digital-only insurance compa - nies by the end of 2023, contingent upon fac - tors such as industry market trends. Recent reports suggest that the FSC is re-evaluating the potential to reopen applications for digital insur - ance companies and is assessing the regulatory adjustments required to facilitate this decision. Notwithstanding the above, the FSC had emphasised that the advancement of the digi - tal economy and the growing need for internet- based services among the younger generation will continue to drive the implementation of the insurance industry’s digital transformation poli - cy, regardless of whether digital insurance com - panies are established or not. Outsourcing by Financial Services Entities With the development of technology, there have been many changes and amendments to the policies and regulations regarding outsourcing in the financial services industry in Taiwan. For example: (1) In accordance with the revised outsourcing rules for banks, if a bank decides to outsource its services to a cloud-based provider, it is required to: (i) ensure that there is appropriate diversifica - tion of cloud service providers; (ii) maintain com - plete ownership of the data that is outsourced to the cloud service provider; (iii) ensure that the processing and storage of data takes place within Taiwan, subject to some exceptions; and (iv) comply with the applicable laws and regu - lations governing outsourcing activities when utilising cloud computing for outsourcing bank operations. (2) In 2023, there were further amendments to the outsourcing regulations for banks, including: (i) defining a risk-based framework for outsourc -
ing, which includes specifying that banks have ultimate responsibility for outsourced opera - tions, and they should assess the risk level, significance, and impact on operations and customer rights of the outsourced matters and adopt appropriate control measures based on a risk-based approach; (ii) simplifying the out - sourcing application process and documents; and (iii) adjusting the scope of applications to the regulatory authority for cross-border and cloud-based outsourcing operations. (3) In the past, only banks and insurance com - panies had relatively clear regulations for out - sourcing in the financial services industry. Other types of financial services entities such as securities firms, securities investment trust enterprises and futures commission merchants did not have a comprehensive set of outsourc - ing regulations. However, in August 2023, the FSC officially established a set of outsourcing regulations applicable respectively to securities firms, securities investment trust enterprises and futures commission merchants, providing clearer provisions for the scope and regulations of outsourcing for these entities. (4) E-payment-related regulations were revised in late 2024 to allow outsourcing of e-payment institution operation to cloud service providers. In the era of AI and digital technology, it is antici - pated that there will be an increasing demand for digital transformation in the financial services industry, which may involve AI or other emerging technologies. When making decisions regarding individual outsourcing needs, the financial servic - es industry must consider not only the efficiency, cost savings and information security brought by outsourcing but also the feasibility under the aforementioned regulatory framework, and make decisions based on comprehensive judgement.
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