The Financial Supervisory Commission (FSC) announced its intention to develop Taiwan into an Asian asset management center, aiming to retain capital, attract investment, and support local industries. The FSC, in order to bolster Taiwan's asset management sector, encourages life insurance companies to retain domestic asset managers to conduct discretionary investment of their funds.
Many Taiwanese insurance companies and domestic securities investment trust and consulting enterprises (referred to as SITEs and SICEs) are subsidiaries or affiliates of the same financial holding companies, therefore they are subject to interested parties regulations.
After assessing that the risks are controllable, the FSC has reviewed the possibility of relaxing restrictions on the use of discretionary investment arrangements by insurance companies to invest in interested parties.
   The FSC has completed a draft amendment to Articles 4 and 6 of the "Regulations Governing Transactions Other Than Loans between Insurance Enterprises and Interested Parties" (hereafter referred to as the Regulations), which will soon be announced in accordance with legal procedures.
The draft amendment includes two articles. The key points are as follows:
1、Under pre-amendment regulatory provisions, when an insurance enterprise intends to engage in discretionary transactions with interested parties, it may draw up internal operational rules with the concurrence of at least three-quarters of all directors present at a board of directors meeting attended by at least two-thirds of all directors to give the managing department general authorization to engage in those transactions according to the operational rules, and the terms of such transactions may not be more favorable than those offered to other same category counterparties. This amendment allows the authorization method to extend to the management of discretionary transaction fees and commissions. (Amended Article 4)
2、Under pre-amendment regulatory provisions, when an insurance enterprise acquires (through investment) or disposes an ETF issued by an interested party, if the acquired or disposed amount exceeds 10% of the total beneficiary certificates issued by that ETF, the transaction amount shall be included in the total amount of the insurer's transactions with interested parties. The amendment, however, takes into account the existing regulatory framework under the "Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises" concerning the financial, business, and personnel management of delegated institutions, and stipulates that insurance companies investing in ETFs issued by stakeholders through discretionary transactions shall be exempt from including amounts exceeding 10% of the ETF's total issued certificates in the total balance of the insurer's transactions with interested parties, in accordance with the Insurance Act and other relevant regulations. (Amended Article 6)。
The FSC stated that, to gather diverse opinions and ensure comprehensive review, the draft amendments will be published in the Executive Yuan Gazette and on the FSC's website, including explanatory notes and a comparison of amended provisions. Interested parties are invited to submit comments on the FSC's "Draft Announcement" webpage within 30 days of the announcement period.
Attachments: Explanatory notes and comparison of amended Articles 4 and 6 of the "Regulations Governing Transactions Other Than Loans between Insurance Enterprises and Interested Parties"

Contact Unit: Division of Financial Supervision, Insurance Bureau
Contact Number: (02)89680732
For inquiries, please email the FSC's Public Opinion Mailbox.