Insufficient Information Summary

As noted in the 2009 U.S. Department of Commerce Country Commercial Guide, the insurance industry in Taiwan has been liberalized and opened to foreign investment. The Financial Supervisory Commission (FSC), according to its 2008 Annual Report, participates actively in the subcommittees of the International Association of Insurance Supervisors (IAIS). However, there is insufficient publicly available information as to Taiwan's observance of the Insurance Core Principles promulgated by the IAIS. Effective July 1, 2004, the FSC was created as the integrated financial supervisory and regulatory authority in Taiwan to resolve the problem of overlapping authorities. The Insurance Bureau of the FSC, formerly known as the Department of Insurance, is responsible for the supervision of the insurance industry. The legal framework for insurance supervision in Taiwan is mainly comprised of the Insurance Act, which was last amended in July 2007. According to the FSC 2008 Annual Report, the FSC was drafting a Financial Services Enterprise Act.

General Overview

The Financial Supervisory Commission (FSC) was established on July 1, 2004 as an integrated financial supervisory and regulatory authority, merging three separate departments of the Ministry of Finance (MoF): the Department of Insurance, the Bureau of Monetary Affairs, and the Securities and Futures Commission. Currently, the FSC comprises four bureaus: the Insurance Bureau (IB), the Banking Bureau (BB), the Securities and Futures Bureau (SFB), and the Financial Examination Bureau (FEB). The IB, formerly known as the Department of Insurance, is responsible for the supervision of the insurance industry, whereas the FEB is in charge of the examination of all financial institutions. As reported on the FSC's website, "as the financial services and activities become more sophisticated and diversified, both the regulatory and examination responsibilities need to be further modified and consolidated to enhance the effectiveness and efficiency of financial supervision." In 2005, according to the IB's website, the FSC participates actively in the events of Technical Committee, Implementing Committee, Accounting Subcommittee, Insurance Fraud Subcommittee, Solvency and Actuarial Issues Subcommittee, and Regional Coordination Subcommittee of the International Association of Insurance Supervisors' (IAIS). Nevertheless, there is insufficient publicly available information as to Taiwan's observance of the Insurance Core Principles (ICPs) promulgated by the IAIS
As noted in the 2009 U.S. Department of Commerce (DoC) Country Commercial Guide, the insurance industry has been liberalized and opened to foreign investment. The legal framework for insurance supervision in Taiwan is mainly comprised of the Insurance Act. In April 2006, according to the IB's website, the Executive Yuan approved draft amendments to the Insurance Act which aim to expand the scope of business of insurance firms; improve supervision of insurers' financial strength; enhance the flexibility of insurers' investments; and safeguard consumer interests. The Act was last amended in July 2007. In September 2006, the Executive Yuan adopted the "Financial Market Package Project," prepared jointly by the FSC and the MoF to establish a diversified, internationalized, and stable financial system in Taiwan. Furthermore, The FSC, according to its 2006 Annual Report, was drafting a Financial Services Act. According to the IB website, Taiwan’s insurance sector had 59 insurance companies, with 4 reinsurance companies in 2009.

The Principles

IIICP 1 Conditions for effective insurance supervision

The available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 2 Supervisory objectives

The supervisory objectives of the IB, as noted on its website, include maintaining a sound environment for insurance businesses, constructing an orderly competitive market, monitoring the normal operation of insurance companies, enhancing the protection to insurance policy holders, and promoting the development of insurance businesses. Despite the information provided above, the available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 3 Supervisory authority

The responsibilities of the FSC, as noted on its website, include supervision, examination, and inspection of the financial market. The FSC includes four bureaus: the IB, the BB, the SFB, and the FEB. The IB, formerly known as the Insurance Department, is responsible for the supervision of the insurance industry, whereas the FEB is in charge of the examination of all financial institutions. The FSC, as noted on its website, functions as an independent agency that directly reports to the Executive Yuan. Furthermore, the FSC has adequate resources to carry out vigorous law enforcement and comprehensive supervision due to its quasi-judicial power. The chairperson and commissioners of the FSC are appointed by the President of the Republic of China (ROC) (Taiwan). Despite the information provided above, the available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 4 Supervisory process

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 5 Supervisory cooperation and information sharing

As noted in its 2008 Annual Report, in 2008, the FSC signed Memoranda of Understanding (MOUs) with a number of countries, including Morocco, Jordan, Canada, and Dubai “for cooperation in single sector or cross-sector supervision” (p. 34), to demonstrate its commitment to effective cross-border supervision. Also, according to a June 2009 FSC Press release, the Commission was one of three countries (including Bermuda and Germany) to become initial signatories to the IAIS multilateral memorandum of understanding (MMoU). The MMoU consists of essential arrangements for sharing information, and for maintaining confidentiality. The Press Release further stated that “with the MMoU in place, insurance supervisors will be better equipped to improve the effectiveness of cross-border supervision of insurance companies.” This is the FSC’s first ever signed MMoU with an international institution. However, the available sources do not directly address Taiwan's compliance with this principle.

IIICP 6 Licensing

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 7 Suitability of persons

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 8 Changes in control and portfolio transfers

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 9 Corporate governance

In its 2008 Annual Report, the FSC noted that it would regularly hold international conferences, like the Taipei Corporate Governance Forum, "to give guidance on improving corporate governance and information transparency as well as to boost investor confidence" (p. 50). However, the available sources do not directly address Taiwan's compliance with this principle.

IIICP 10 Internal control

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 11 Market analysis

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 12 Reporting to supervisors and off-site monitoring

According to its 2006 Annual Report, "the FSC ha[d] set up a financial supervisory database and an information sharing platform to simplify the process for the sending of call reports by financial institutions and improve off-site monitoring procedures" (p. 30). Despite the information provided above, the available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 13 On-site inspection

According to the 2008 Annual Report, the FSC through its FEB, is in charge of the examination of all financial institutions. In 2008, per the same report, 466 on-site examinations were carried out. Despite the information provided above, the available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 14 Preventive and corrective measures

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 15 Enforcement or sanctions

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 16 Winding-up & exit from the market

As noted in the FSC 2008 Annual Report, the Taiwanese Financial Restructuring Fund’s (FRF) objective is cleanup distressed financial institutions. The FSC requires that troubled financial institutions submit a turnaround plan, which includes a time table for capital injection and/or merger that will be guided by supervision. Incompletion of the plan will see distressed institutions “taken over by the government and forced to exit the market” (p. 30). Per the same report, the amendment to Articles 143 and 149 of the Insurance Act in 2007 “strengthens the role of the stabilization funds; empower the competent of the stabilization funds; empower the competent authority and conservators to apply to the court for reorganization; and restrict the period of conservatorship. These changes make the market exit mechanism more efficient and stabilize the financial system” (p. 30).

IIICP 17 Group-wide supervision

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 18 Risk assessment and management

The FSC, as noted in its 2006 Annual Report, had required insurance companies to enhance risk management procedures and to establish an appropriate asset-liability allocation system to strengthen the financial structure of insurance companies. Furthermore, the FSC had implemented the appointed actuary system, and continued to review the Risk Based Capital System (RBCS), which was established in 2003 for early identification of solvency problems in insurance companies. In order to enhance and strengthen the risk management of financial institutions, the 2008 Annual Report notes that the FSC “has adopted a risk-based approach to its financial examinations, established a responsible group to review the implementation of risk-management by financial institutions, and required their internal auditors to review the risk-management mechanism” (p. 32). Despite the information provided above, the available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 19 Insurance activity

According to the 2008 Annual Report, the FSC in 2008 administered amendments on a number of regulations to respond to changes in the insurance sector, as well as to enhance risk management of re-insurers. There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 20 Liabilities

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 21 Investments

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 22 Derivatives and similar commitments

There is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 23 Capital adequacy and solvency

The FSC, according to its 2008 Annual Report, eased requirements for risk-based capital through 2009 and is going to continue to work with insurers who plan to issue stock or hybrid bonds, “while pushing weakly capitalized insurers that have not put forward any concrete turnaround plans to take expedited action to improve their capital base” (p. 47). Per the same report, the FSC will continue to push insurers to improve their risk management systems and will continue to amend regulations that govern the capital allocation of insurance enterprises, to ensure the stabilization and strengthening of the solvency of insurance companies. The 2008 Annual Report also states that FSC administered the ‘Methods of Dsclosure by Insurance Enterprises of Risk-based Capital’, which requires insurers to “disclose their capital adequacy ratios as higher than 300percent, between 200 – 300 percent, or below 200 percent” (p. 33). Nevertheless, there is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 24 Intermediaries

In February 2005, according to the IB's website, the FSC amended the Regulations Governing Insurance Agents, the Regulations Governing Insurance Brokers, and the Regulations Governing the Supervision of Insurance Solicitors to strengthen the management of insurance intermediaries. The IB further noted that these amendments addressed changes in the insurance market and supervisory needs. Despite the information provided above, the available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 25 Consumer protection

The FSC, according to its 2008 Annual Report, was drafting a Financial Services Enterprise Act to, inter alia, improve the protection of consumers and investors, as well as “integrate cross-industry participation in financial services” (p. 44). Nevertheless, there is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 26 Information, disclosure & transparency towards the market

As noted on the IB's website, the FSC implemented Regulation Governing the Disclosure of Information of Non-life Insurance Industry, as well as the Regulation Governing the Disclosure of Information of Life Insurance Industry. Despite the information provided above, the available sources do not directly address Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 27 Fraud

The FSC, according to its 2008 Annual Report, participates actively in the Insurance Fraud Subcommittee of the IAIS. It also holds periodic seminars on insurance crime to assist law enforcement agencies develop a better understanding of insurance issues. Per the same report, the IB takes active part in “in presentations made by the Consultation and Coordination Committee of the Economic Crimes Investigation Center, Taiwan High Prosecutors Office, and the Economic Crime Prevention Task Force Committee (ECPTFC) of the Ministry of Justice Investigation Bureau to maintain close cooperation with prosecutors, police, and investigation units” (p. 40). Nevertheless, there is insufficient information publicly available addressing Taiwan's compliance with this principle as revised in 2003 by the IAIS.

IIICP 28 Anti-money laundering/ Combating the Financing of Terrorism

Taiwan is a founding member of the APG, and was elected to the steering committee of the APG in 2005. According to the APG's 2007 Mutual Evaluation Report on Chinese Taipei, the FSC provided guidance to insurers in order to comply with the 1997 Money Laundering Control Act (MLCA). The FSC also conducted regular on-site examinations, and had the authority to impose administrative fines in accordance with the provisions of the MLCA. However, the APG report noted that there was no specific requirement for the insurance sector to perform customer due diligence (CDD), and customer identification was not clearly captured by a law or a regulation. Furthermore, insurance agents and brokers were exempted from the current anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements. Finally, there was insufficient oversight of branches and subsidiaries in countries which do not or insufficiently apply the Financial Action Task Force recommendations on AML/CFT.

In July 2005, the IB, as noted on its website, approved the "Model for the Guidelines and Procedures of Money Laundering Control on life Insurance Industry," and in January 2006, adopted the "Anti-Money Laundering Guidelines and Procedures Template for Non-life Insurance Industry." Both the 2008 and 2009 US DoS reports state that, amendments to the MLCA in 2007 extended money laundering responsibilities to the FSC, and enabled the exchange of information with law enforcement agencies in countries that have signed a mutual legal assistance agreement with Taiwan. In addition, the amendment enabled the expansion to include “a new agricultural bank, trust companies, and newly licensed currency exchanges as well as hotels, jewelry stores, postal offices, temples and bus/railway stations, essentially all entities that may be involved in currency exchange” (2009 DoS, p. 486). Although Taiwan is not a member of the United Nations (UN), it has adopted and implemented laws in compliance with the goals and objectives of the different UN Conventions.

In response to the APG’s 2007 mutual evaluation recommendations, the FSC, according to its 2008 annual report, promulgated the Regulations Governing Cash Transaction Reports and Suspicious Transaction Reports by Financial Institutions in December 2008, which went into force in March 2009. Per the same report, the threshold for occasional cash transactions that trigger CDD obligation and require a cash transaction report, lowered to $15,000 (NT$ 500,000) from $30,000 (NT$1 million). The report was optimistic that with the implementation of these regulations, the AML/CFT regulatory regime will be tightened. However, the available sources do not directly address Taiwan's compliance with this principle.