Print Time:2021/10/24 18:34
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Chapter Law Content

Title: Insurance Act CH
Category: Financial Supervisory Commission(金融監督管理委員會)
Chapter V. Insurance Enterprises
Section 1. General Provisions
Article 136
(Organization of an Insurance Enterprise and Relevant Provisions)
Except with the approval of the competent authority, an insurance enterprise may only be organized as a company limited by shares or as a cooperative.
Business organizations other than insurance enterprises may not engage concurrently in the insurance business.
Where violations of the provisions in the preceding paragraph occur, the competent authority or the authority with jurisdiction over the line of business operated by the violator will act in conjunction with the judicial police authorities to suppress the illegal activity, and the case will be referred for prosecution. In the case of a legal entity, its representatives shall be jointly and severally liable for its relevant debts.
When carrying out the tasks referred to in the preceding paragraph, the authorities may search and attach account books and documents of the violators, remove signs and other fixtures, or take other necessary actions in accordance with the law.
An insurance enterprise organized as a company limited by shares shall issue its stock publicly unless another law provides otherwise or the competent authority has granted permission
When an insurance enterprise does not have publicly issued stock pursuant to the exclusions in the preceding paragraph, there shall be independent directors and a Board of Auditors. The Board of Auditors shall exercise the function of supervisor.
For the establishment of the independent directors and the Board of Auditors in the preceding paragraph and other matters to be followed, applicable provisions of Articles 14-2 to 14-5 of the Securities and Exchange Act shall apply.
When the tenure of incumbent directors or supervisors at insurance enterprises as is specified in Paragraph 6 is yet to expire upon enforcement of the articles amended on May 20, 2014, the said provisions shall apply as soon as their tenure expires. When the tenure of incumbent directors or supervisors expires within a year following enforcement of the amended articles, the provisions shall not apply until the tenure of re-elected directors or supervisors expires.
Article 136-1
(Exemption From this Act Within Periods and Scopes as Approved to Facilitate Innovation in Financial Technologies and Financial Regulatory Sandbox)
For the purpose of facilitating the development of inclusive finance and financial technologies, (not limited to) insurance enterprises, insurance brokers, insurance agents and insurance surveyors may apply for approval to undertake an innovative experimentation of insurance business in accordance with the Financial Technology Development and Innovative Experimentation Act.
The provisions of this Act may not apply to an innovative experimentation mentioned in the preceding paragraph during its period nor within its scope approved by the competent authority.
The competent authority should review the appropriateness of this Act and relevant financial regulations in consideration of the implementation status of the innovative experimentation mentioned in Paragraph 1 hereof.
Article 137
(Eligibility Conditions for Establishment of Domestic Insurance Enterprises and Foreign Insurance Enterprises)
An insurance enterprise may not commence operations unless it has received permission from the competent authority, completed establishment registration, posted bond, and secured a business license in accordance with the law.
With respect to applications by insurance enterprises for establishment permits, the competent authority shall prescribe regulations governing the following matters eligibility conditions and procedures for application; required documentation, qualification requirements for promoters, directors, supervisors, and managerial officers; revocation of permits, establishment, transfer, or withdraw of branch units, assignment of insurance contracts, and dissolution; and other compliance matters.
A foreign insurance enterprise may not commence operations unless it has received permission from the competent authority, completed establishment registration, posted bond, and secured a business license in accordance with the law.
Unless otherwise provided by this Act, the provisions of this Act regarding insurance enterprises shall apply mutatis mutandis to foreign insurance enterprises.
With respect to applications by foreign insurance enterprises for establishment permits, the competent authority shall prescribe regulations governing the following matters: eligibility conditions and procedures for application; required documentation, revocation of permits, issuance of business licenses, conditions for the establishment of branch offices, any change in line(s) of business, replacement of responsible person, funds allocations; and other compliance matters.
With respect to an insurance enterprise established in accordance with another act, the provisions of this Act pertaining to insurance enterprises shall apply mutatis mutandis except as otherwise provided by the other act.
Article 137-1
(Necessary Qualifications of the Responsible Persons of an Insurance Enterprise)
The guidelines for qualifications and requirements for the responsible person of an insurance enterprise, restrictions on concurrent posts thereof, prohibition on conflicts of interest and other matters to be complied with shall be prescribed by the Competent Authority.
Where a responsible person of an insurance enterprise does not meet the qualifications and requirements set forth in the guidelines referred to in the preceding paragraph, the Competent Authority shall discharge the person; where a responsible person of an insurance enterprise violates the restrictions on concurrent posts and prohibition on conflicts of interest, the Competent Authority may order the insurance enterprise to make adjustment within a prescribed period of time; the responsible person shall be discharged when the insurance enterprise fails to adjust within the time period and without justifiable reason.
Article 138
(Restrictions on Business Scope of an Insurance Enterprise)
An insurance enterprise in the "non-life insurance" category shall engage in the business of non-life insurance only, an insurance enterprise in the "insurance of the person" category shall engage in the business of insurance of the person only, and the same insurance enterprise may not engage concurrently in non-life insurance and insurance of the person, provided that this restriction does not apply where a non-life insurance enterprise is approved by the competent authority to engage in personal injury insurance or health insurance.
The eligibility conditions, business scope, documentation required in order to apply for approval and other compliance matters. with respect to the conduct of personal injury insurance or health insurance business by non-life insurance enterprises in accordance with the proviso of the preceding paragraph, shall be prescribed by the competent authority.
An insurance enterprise may not engage concurrently in any business other than that prescribed by this Act. However, this restriction does not apply where the competent authority has given its approval for an insurance enterprise to engage in other businesses related to insurance.
Where an insurance enterprise conducts another business related to insurance as provided for in the preceding paragraph, the permission of the Central Bank shall first be obtained if the business involves foreign exchange business.
An insurance cooperative may not engage in any insurance business with any person who is not a member of the cooperative.
Article 138-1
(Co Insurance for Residential Earthquake Risk)
Non-life insurance enterprises shall underwrite residential earthquake risk, and shall do so by means of the risk spreading mechanism established by the competent authority.
The Taiwan Residential Earthquake Insurance Fund shall be established to manage the risk spreading mechanism referred to in the preceding paragraph. The portion of risk that exceeds the co-insurance underwriting assumption limit for non-life insurance enterprises shall be assumed by the Taiwan Residential Earthquake Insurance Fund, cede to domestic and/or foreign reinsurers, be assumed by the manner prescribed by the competent authority or assumed by the government.
With respect to the risk spreading mechanism under the preceding two paragraphs, the competent authority shall prescribe regulations governing the risk assumption limits, insured amounts, insurance premium rates, provision for various reserve funds, and other compliance matters.
The competent authority shall prescribe regulations governing the Taiwan Residential Earthquake Insurance Fund's articles of incorporation, business scope, funds allocations, and other administrative matters.
When the occurrence of a major earthquake results in payable claims that exceed the amount of funds accumulated in the Taiwan Residential Earthquake Insurance Fund, in order to safeguard the interests of insured the Fund may as necessary request the competent authority and the Ministry of Finance to jointly apply for Executive Yuan’s approval of collateral provided by the national treasury to obtain the necessary source of funding.
Article 138-2
(Insurance Trust)
An insurance enterprise engaging in insurance of the person may stipulate an insurance contract that policy proceeds be paid either in a lump sum or in installments.
With respect to the portion of policy proceeds in a contract for insurance of the person that are for death or disablement, the proposer may, prior to occurrence of an insured peril, negotiate a trust contract whereunder the insurance enterprise acts as trustee of the insurance trust. Such an arrangement may only be made where a single person is both proposer and insured, where the beneficiaries of the trust contract are also the beneficiaries of the insurance contract, and where the arrangement is for the benefit of an insured, a person who is a minor, or a person whose declaration of guardianship has not yet been revoked.
With respect to trust benefits paid out pursuant to the preceding paragraph, that part which constitutes trust principal shall be deemed insurance benefits. The same shall apply to a trust contract where under the trust enterprise pursuant to the Trust Enterprise Act acts as trustee of insurance trust.Such an arrangement may only be made where a single person is beneficiary for both trust contract and insurance contract,and where the arrangement is for the benefit of an insured,a person who is a minor ,or a person whose declaration of guardianship has not yet been revoked.
An insurance enterprise providing insurance trust services shall set up segregated trust accounts named as trust asset accounts.
Where the trust assets of the preceding paragraph are subject to a registration requirement, registration of trust shall be carried out in accordance with the applicable provisions.
Where the trust assets of paragraph 4 are securities, when the insurance enterprise sets up a segregated trust account named as a trust asset account and engages in a transaction involving the trust assets, the trust shall be effective against third parties, and Article 4, paragraph 2 of the Trust Act does not apply.
The scope of funds allocations of an insurance enterprise operating insurance trusts shall be limited to the following:
1. Cash or bank deposits.
2.Government bonds or financial bonds.
3. Short-term bills.
4. Other methods of funds allocation as approved by the competent authority.
Article 138-3
(Insurance Trust)
An insurance enterprise shall obtain permission from the competent authority to provide insurance trust services, which must have independent operations and accounting.
An insurance enterprise shall set aside a compensation reserve fund to secure the performance of indemnities, giving back profits, or other obligations to bailors at violation of its duties as trustee.
With respect to applications by insurance enterprises for permission to provide insurance trust services, the competent authority shall prescribe regulations governing the following matters: eligibility conditions; required documentation; conditions for the revocation of permits; amount defined for the compensation reserve fund, and the way of depositing; and other compliance matters.
Article 138-4
(Disclose the Contractual Terms and Relevant Information of the Insurance Products on the Website)
An insurance enterprise shall post the existing contractual terms and conditions for the insurance products sold by it at its own website or the website designated by the competent authority, and also disclose the designated surcharges, coverage and statutory exclusions for the products and other insurance product information designated by the competent authority.
Article 139
(Minimum Capital or Fund)
The minimum capital or fund for each of the various kinds of insurance enterprises will be approved separately by the Executive Yuan, acting upon the recommendation of the competent authority, which shall take into consideration the economic conditions in each locality and the needs of each kind of insurance business.
Article 139-1
(Supervision for Eligibility of the Controlling Shareholders of an Insurance Company)
A same person or same related party who singly, jointly or collectively acquires more than 5 percent of the total outstanding voting shares of an insurance company shall report such fact to the competent authority within ten (10) days from the day of acquisition; the preceding provision applies to each cumulative increase or decrease in the shares held the same person or same related party by more than one percent (1%) thereafter.
A same person or same related party who intends to singly, jointly or collectively acquire more than 10 percent, 25 percent, or 50 percent of the total outstanding voting shares of an insurance company shall apply for prior approval of the competent authority.
A third party who holds shares of an insurance company on behalf of a same person or same related party in trust, by mandate or through other types of contract, agreement or authorization shall fall within the purview of a related party.
A same person or same related party who singly, jointly or collectively holds more than 5 percent of the total outstanding voting shares of an insurance company prior to the implementation of the amendment to the Act dated November 12, 2010 shall report such fact to the competent authority within six (6) months from the implementation date of said amendment. A same person or same related party whose shareholding (in an insurance company) will exceed 10 percent when they intend to increase or decrease their shareholding for the first time after the aforementioned reporting shall apply for the prior approval of the competent authority. The provisions in the first paragraph and the second paragraph hereof shall be followed for increase or decrease in shareholding for the second time and subsequently thereafter.
The regulations governing the qualifications and requirements for a same person or same related party who applies for approval pursuant to the second paragraph or the preceding paragraph hereof, required documentation, shares to be acquired, purpose of acquisition, sources of funding, pledging of shares held, shares held, reporting and announcement of other important changes, and other matters to be complied with shall be prescribed by the competent authority.
Where a same person or same related party who holds voting shares issued by an insurance company without filing a report with the competent authority or obtaining approval from the competent authority in accordance with the provisions set forth in Paragraphs 1, 2 or 4 hereof, the excess shares held by such same person or same related party shall not have voting rights and shall be disposed of within the given time period as ordered by the competent authority.
If the total number of an insurance company’s shares held by a same person or by a principal, his/her spouse and children under twenty (20) years of age combined exceeds 1 percent of the insurance company’s outstanding voting shares, such principal shall notify the insurance company thereof.
Article 139-2
(Regulations of a Same Person or Related Party Holding the Voting Shares of an Insurance Company)
The term “same person” as used in the preceding article shall mean a same natural or juristic person.
The term “same related party” as used in the preceding article shall mean parties related to a same natural or juristic person, including:
1. Parties related to the same natural person:
(1) The principal, his/her spouse and relatives by blood within the second degree of kinship.
(2) An enterprise in which the persons referred to in the preceding subparagraph hold more than one third (1/3) of its outstanding voting shares or more than one third of its capital.
(3) An enterprise or a foundation in which the persons referred to in subparagraph (1) hereof act as its chairman, president or directors representing the majority of directors.
2. Parties related to the same juristic person:
(1) The same juristic person and its chairman and president as well as the spouse and relatives by blood within second degree of kinship of the chairman and president.
(2) Enterprises in which the same juristic person and natural persons referred to in the preceding subparagraph hold more than one third (1/3) of their outstanding voting shares or more than one third of their capital, or enterprises or foundations in which the same juristic person and natural persons referred to in the preceding subparagraph act as their chairman, president or directors representing the majority of directors.
(3) The affiliates of the same juristic person. The term “affiliate” shall be defined under Articles 369-1 through 369-3, Articles 369-9 and 369-11 of the Company Act.
The calculation of shares of an insurance company held by a same person or same related party under the preceding two paragraphs shall exclude shares held under the following circumstances
1. Shares acquired by a securities firm during the underwriting period of the securities and disposed of during the period prescribed by the competent authority.
2. Shares acquired by a financial institution under a collateral agreement and four years have not elapsed since the date of acquisition.
3. Shares acquired by inheritance or bequest and two years have not elapsed since the date of inheritance or bequest.
Article 140
(Enter into an Insurance Contract Including Participation in Policy Dividends)
An insurance company may enter into an insurance contract that includes participation in policy dividends.
An insurance cooperative shall enter only into insurance contracts that include participation in policy dividends.
The basis and method of calculating the policy dividends in the preceding two paragraphs shall be expressly provided in the insurance contract.
Article 141
(Amount to Deposit Bond)
An insurance enterprise shall post bond at the national treasury in an amount equal to 15 percent of the total amount of its paid-in capital or paid-in fund.
Article 142
(Deposit Bond and Circumstances for not Returning the Bond)
The bond shall be posted in cash. However, upon approval of the competent authority, government bonds or notes may be posted instead.
The bond posted as provided in the preceding paragraph is not to be returned except under any of the following circumstances:
I. The insurance enterprise is declared bankrupt by the court.
II. The insurance enterprise is placed into receivership, ordered to suspend business and undergo rehabilitation, or ordered to liquidate by the competent authority according to the provisions herein and the return has been filed for by the receiver, rehabilitator, or liquidator and approved by the competent authority.
III. The insurance enterprise is ordered to suspend business and has completed liquidation according to the law.
In order for the receiver to be qualified to file for approval of the return of bond with the competent authority in accordance with the provisions of Subparagraph 2 in the preceding paragraph, the receiver has to be assigned all of the business of the insurance enterprise placed into receivership during the receiving period.
Where marketable securities are used to post bond, when cessation of business has been declared and liquidation is duly performed, the interest coupon attached thereto may be used to offset liquidation expenses.
Article 143
(Complement to the Bond and Borrowing Funds)
An insurance enterprise may not borrow funds from an outside party, act as guarantor for an outside party, or provide its assets as collateral for the debt of another; provided, that this restriction does not apply where any one of the following circumstances obtains with respect to the insurance enterprise and the enterprise reports to and obtains the approval of the competent authority to borrow funds from an outside party:
1. The borrowing is to meet cash flow needs arising from payment of major benefits, a large amount of policy surrenders, or a large amount of policy loans.
2. The borrowing is needed for a merger or for assumption of the in-force contracts of a troubled insurer.
3. The borrowing is done by issuing bonds with capital characteristics, for the purpose of strengthening financial structure.
Article 143-1
(Contributions to the Stabilization Funds)
In order to preserve the insured's basic interests and to maintain financial stability, enterprises engaged in non-life insurance and insurance of the person shall make contributions to set up separate stabilization funds as incorporated foundations.
Regulations governing the organization, administration, and other matters of the incorporated stabilization fund foundations shall be prescribed by the competent authority.
The stabilization funds shall be supported by contributions from each insurance enterprise. The contribution rate of each enterprise shall be determined by the competent authority, taking into consideration the condition of the economy, the state of development of the financial industry, and the ability of insurance enterprises to pay, and may not be lower for any given insurance enterprise than 1/1000th of gross premium income.
When the amount of funds accumulated in a stabilization fund is insufficient to safeguard the interests of insured parties and there is a likelihood of serious threat to financial stability, the fund may report to the competent authority for permission to borrow funds from the financial institutions.
Article 143-2
(Deleted)
(Deleted)
Article 143-3
(Matters Responsibled by the Stabilization Funds)
The stabilization funds shall handle the following matters:
1. Extend loans to insurance enterprises experiencing business difficulties.
2. A stabilization fund may provide low-interest loans or advance expenditures to insurance enterprises that incur losses by merging with troubled insurance enterprises or assuming their contracts and may make claims against the said troubled insurance enterprises for the value of the said advance expenditures.
3. When, in accordance with the provisions of Article 149, Paragraph 3, an insurance enterprise is placed into receivership, ordered to suspend business and undergo rehabilitation, or ordered to dissolve, or when a receiver applies to a court for reorganization in accordance with provisions of Articles 149-2, Paragraph 2, Subparagraph 4, the appropriate stabilization fund shall, as necessary, advance funds on behalf of the insurance enterprise to settle claims which proposers, insured parties, and beneficiaries are entitled to make under in-force contracts, and with respect to the amount thus advanced shall succeed to and exercise the rights of claim of those proposers, insured parties, and beneficiaries against the insurance enterprise.
4. In order to safeguard the interests of insured parties and help expedite reorganization proceedings, when an insurance enterprise undergoes reorganization in accordance with the provisions of this Act, proposers, insured parties, and beneficiaries shall, unless they object in writing, be deemed to have granted consent for the stabilization fund to act as their agent in attending meetings of related parties and exercising rights related to the reorganization. The stabilization funds shall adopt procedures for actions they take when serving as agent, as well as other compliance matters, and shall file them with the competent authority for recordation.
5. A stabilization fund may act as conservator, receiver, rehabilitator, or liquidator upon appointment by the competent authority.
6. Assume, upon approval by the competent authority, the insurance contracts of insolvent insurance companies.
7. A stabilization fund may involve contributions from non-life insurance enterprises and life insurance enterprises.
8. A stabilization fund may be designated by the competent authority to handle related financial, business, and operation risk information to be compiled and reported by insurance enterprises in accordance with provisions herein within the scope of the designation.
9. Undertake other matters, as approved by the competent authority, to stabilize the insurance market or safeguard the interests of insured parties.
When handling matters indicated in Subparagraphs 1 to 3 and Subparagraph 9 in the preceding paragraph, restrictions with regard to the utilization timing, scope, unit value, and total value shall be established by the stabilization fund and submitted to the competent authority for approval.
The stabilization fund shall submit to the competent authority for approval the value of advance expenditures being applied for in accordance with the provisions of Paragraph 1, Subparagraph 2 to cover the losses that incur as a result of insurance enterprises merging with troubled counterparts or assuming their contracts.
When the stabilization fund handles matters indicated in Paragraph 1, Subparagraphs 7 and 8, the competent authority may provide necessary insurance enterprise operation information if necessary.
When the stabilization fund handles matters indicated in Paragraph 1, Subparagraphs 7 and 8 with prior approval from the competent authority, the insurance enterprise shall prepare electronic data files of various reserve funds and provide the stabilization fund with electronic data files considered necessary in the format and with the content established by the stabilization fund.
The stabilization fund may audit the following areas of insurance enterprises:
I. Accuracy of the contribution ratio and contents to be included in the electronic data files specified in the preceding paragraph.
II. Assets, liabilities, and business operation-related matters of insurance enterprises whose ratio of total adjusted net capital to risk-based capital fails to comply with the provisions of Article 143-4.
When the conservator, receiver, rehabilitator, and liquidator’s person in charge and employees perform conservatorship, receivership, rehabilitation, and liquidation tasks in accordance with the Act or the person in charge and employees of the stabilization fund processes advance expenditures or advance payments in accordance with the Act but unlawfully infringe upon other people’s rights on purpose or due to negligence, the conservator, receiver, rehabilitator, liquidator, or the stabilization fund shall be responsible for compensation.
When the person-in-charge and employees did it on purpose or are found with major negligence in the preceding conditions, the conservator, receiver, rehabilitator, liquidator, or stabilization fund is entitled to make a claim against them.
Article 143-4
(Capital Adequacy Ratio and the Categorization)
An insurance enterprise's ratio of total adjusted net capital to risk-based capital and the net worth ratio shall not be less than a certain ratio.
An insurance enterprise shall be graded by capital as follows based on the ratio of total adjusted net capital to risk-based capital and the net worth ratio:
1. Adequate capital;
2. Inadequate capital;
3. Significantly inadequate capital;
4. Seriously inadequate capital.
The seriously inadequate capital referred to in the preceding sub-paragraph 4 means that the ratio of total adjusted net capital to risk-based capital is less than 25% of a certain ratio defined in Paragraph 1 or the insurance enterprise’s net worth is less than zero.
With regard to a certain ratio, the calculation of the net worth ratio, and total adjusted net capital and risk-based capital as referred to in Paragraph 1, the competent authority shall prescribe regulations governing the following matters: their scope; the method for calculating their amounts; administration thereof; categorization of the capital adequacy ratio referred to in the sub-paragraphs 2 and 3 of Paragraph 2; and other compliance matters.
Article 143-5
(Circumstances for not Distributing Earnings, Repurchasing Shares or Refunding Capital Stock in Any Form Other Than Stock Dividend or Deposit As Capital Stocks Subscribed by the Members)
An insurance enterprise which meets any of the following circumstances shall not distribute earnings, repurchase shares or refund capital stock in any form other than stock dividend or deposit as capital stocks subscribed by the members:
1. The insurance enterprise is graded as having inadequate capital, significantly inadequate capital or seriously inadequate capital;
2. The insurance enterprise is graded as having adequate capital, is likely to be degraded as that categorized in the preceding sub-paragraph if the enterprise distributes earnings, repurchases shares or refunds capital stock in any form other than stock dividend or deposit as capital stocks subscribed by the member.
The insurance enterprise referred to in the sub-paragraph 1 of the preceding paragraph shall not pay the responsible person any benefits other than remuneration, unless with approval from the competent authority.
Article 143-6
(Competent Authority’s Adopting Relevant Supervisory Measures, Subject to the Insurance Enterprise’s Capital Adequacy Ratio)
The competent authority shall adopt any or all of the following measures, subject to the grading of an insurance enterprise’s capital:
1. In the case of inadequate capital:
(1) To order the insurance enterprise and its responsible person to put forward a plan for capital increase or another corrective action plan for finance or business within the specified period; where the insurance enterprise fails to submit the same within the specific period or fails to implement the plan, the competent authority may take supervision measures against the capital adequacy ratio;
(2) To order the insurance enterprise to cease selling insurance products or restrict it to launch new insurance products;
(3) To restrict the scope of fund utilization;
(4) To restrict the remuneration, bonus, stock options, or other payments of similar properties to the responsible person of the insurance enterprise;
(5) To take other necessary measures.
2. In the case of significantly inadequate capital:
(1) To take the measures set forth in the preceding sub-paragraph;
(2) To dismiss the responsible person of the insurance enterprise, and inform the authority in charge of company registration to cancel the registration of the insurance enterprise;
(3) To suspend the responsible person from exercising his/her duties within a certain period;
(4) To require the insurance enterprise to obtain prior approval by the competent authority itself for acquisition or disposal of any specific assets;
(5) To order the insurance enterprise to dispose of the assets specified;
(6) To restrict or forbid the insurance enterprise to extend loans to or conduct other transactions with the interested parties thereof;
(7) To order the insurance enterprise to lower the remuneration of its responsible person, which, afterwards, shall not exceed 70% of the average remuneration paid to said responsible person within the 12 months before the insurance enterprise's capital is graded as being significantly inadequate;
(8) To restrict establishment of or order dissolution, within the specified period, of a branch or department; and
(9) To take other necessary measures.
3. In the case of seriously inadequate capital: In addition to the measures referred to in the preceding sub-paragraph, the measures referred to in the sub-paragraph 1 of Paragraph 3 of Article 149 herein shall also apply.
Article 144
(Prescription of the Regulations Governing the Policy Relevant Content;Insurance Enterprise Employment of the External Actuaries Responsibled for the Matters to Be Verified in the Actuarial Report Defined by the Competent Authority)
With respect to the policy provisions, premiums, and other relevant content for a given type of insurance policy, the competent authority shall prescribe regulations governing the following matters, taking into account the state of development of that type of insurance: procedures to be carried out before a policy is marketed; product review; and the actions to be taken when the content of a policy is incorrect, false, or in violation of the law.
In order to ensure sound operation of its insurance business, an insurance enterprise shall employ actuaries and appoint one of them as appointed actuary, who shall be responsible for setting premium rates, certifying various reserve, and handling other matters specified by the competent authority. Regulations governing qualification requirements, items to be certified, education and training, and other compliance matters shall be prescribed by the competent authority.
An insurance enterprise shall employ external actuaries responsible for handling the matters to be verified in the actuarial report defined by the competent authority. Regulations governing qualification requirements, frequency of verification, contents of the verification report, and other compliance matters shall be prescribed by the competent authority.
Appointment of the appointed actuary referred to in Paragraph 2 and employment of the external actuaries referred to in the preceding paragraph shall be subject to the consent of the board of directors and shall be filed to the competent authority.
The appointed actuary shall, in accordance with the principles of impartiality and fairness, provide various certified reports to the board of directors, as well as to the competent authority. The certified report and verification report shall be free from any misrepresentation, concealment, omission, or incorrect information, etc..
Article 144-1
(Circumstances for Underwriting Insurance by Way of Co Insurance)
Insurance enterprises may underwrite insurance by way of co-insurance under the following circumstances:
1. When insuring against catastrophic loss.
2. When coordinating with government policy.
3. When seeking to further the public interest.
4. When seeking to effectively enhance services to the insurance-buying public.
5. When seeking to accomplish other objectives approved by the competent authority.
Article 145
(Deposit of Various Reserves)
At the end of each business year, an insurance enterprise shall calculate the reserves for each type of insurance, and shall record such reserves in special account books.
The competent authority shall prescribe regulations governing the reserving, calculation methods, and other compliance matters for the various reserves referred to in the preceding paragraph.
Article 145-1
(Distributing Earnings)
After paying all taxes, an insurance enterprise preparing to distribute earnings shall first set aside 20 percent to legal capital reserves; provided, that this requirement does not apply where legal capital reserves are already equal to the enterprise's authorized capital or authorized fund.
An insurance enterprise may additionally set aside special capital reserve in accordance with the provisions of its articles of incorporation or a resolution of a shareholders meeting or general assembly of cooperative members. The competent authority may as necessary order an insurance enterprise to set aside such reserve.
The provisions of paragraph 1 shall enter into force from the next fiscal year after the provisions of this Act amended on [DATE] take effect.
Article 146
(Funds Allocations and Definition)
Except for savings deposits, the funds allocations of an insurance enterprise shall be limited to the following:
1. Securities.
2. Real estate.
3. Loans.
4. Allocation of funds to special projects and investments in public utilities and social welfare enterprises, with the approval of the competent authority.
5. Foreign investments.
6. Investments in insurance-related businesses.
7. Derivatives trading.
8. Other funds allocations as approved by the competent authority.
The term "funds" in the preceding paragraph includes owner's equity and various reserve funds.
The savings of paragraph 1 deposited in any single financial institution may not, unless approved by the competent authority, exceed 10 percent of the insurance enterprise's funds; provided, this restriction does not apply where the competent authority has granted approval.
"Insurance-related businesses" in paragraph 1, subparagraph 6 means the businesses of insurance, financial holding, banking, bills, trust, credit card, finance leasing, securities, futures, securities investment trust, and securities investment consulting enterprises, as well as other insurance-related businesses as recognized by the competent authority.
An insurance enterprise that engages in investment-linked insurance business or labor pension annuity insurance business shall set up a separate account to record the value of the assets in which it invests.
The competent authority shall prescribe regulations governing administration and custody of separate account, allocation of investment assets, and other compliance matters pertaining to investment-linked insurance business, which are not subject to the restrictions set forth in paragraph 1; paragraph 3; Article 146-1; Article 146-2; Article 146-4; Article 146-5; and Article 146-7.
With respect to assets for which a separate account is required under paragraph 5, if a proposer retains an insurance enterprise by means of an insurance contract to exercise discretionary allocation of the assets and those assets are allocated to the purchase of the securities defined in Article 6 of the Securities and Exchange Act, application for concurrent operation of discretionary investment services shall be made in accordance with the Securities Investment Trust and Consulting Act.
With respect to the derivatives trading of paragraph 1, subparagraph 7, the competent authority shall prescribe regulations governing the terms and conditions of such trading, the scope thereof, transaction limits, internal handling procedures, and other compliance matters.
Article 146-1
(Authorize Securities Purchased by the Funds of Insurance Enterprise)
The funds of an insurance enterprise may be used to purchase the following marketable securities:
1. Government bonds and treasury bills.
2.Financial bonds, negotiable certificates of deposit, banker's acceptances, and commercial promissory notes guaranteed by a financial institution, the aggregate amount of which may not exceed 35 percent of the funds of the insurance enterprise.
3. Company stock whose public issuance is approved by law: The aggregate amount and total shares of stock purchased from each company plus stock option-based securities approved by the competent authority to be purchased may not total over 5% of a specific insurance enterprise’s capital and 10% of the total outstanding voting shares of the issuing company respectively.
4. Publicly issued guaranteed corporate bonds or corporate bonds and non-guarantee commercial paper issued by a company rated by a rating agency at no lower than a specified rating and approved in accordance with the law, provided that the aggregate amount made by an insurance enterprise in such corporate bonds and non-guarantee commercial paper may not exceed 5 percent of the funds of the insurance enterprise, and the aggregate amount of bonds from any one company may not exceed 10 percent of the owner's equity of the company issuing the corporate bonds.
5. Beneficial interest certificates for securities investment trust funds and mutual trust funds for which public issue has been duly approved. The aggregate amount of such investment made by an insurance enterprise may not exceed 10 percent of the funds of the insurance enterprise, and an insurance enterprise may not invest in more than 10 percent of the aggregate amount of the beneficial interest certificates issued by any fund.
6. Securitization products and other marketable securities that the competent authority has granted approval for insurance enterprises to purchase, the aggregate amount of which may not exceed 10 percent of the funds of the insurance enterprise.
The aggregate amount of the investments contemplated under subparagraphs 3 and 4 of the preceding paragraph may not exceed 35 percent of the funds of the insurance enterprise.
Investments made by insurance enterprises in accordance with Paragraph 1, Subparagraphs 3 and 6 may not be found with any of the following conditions:
I. For the insurance enterprise or a representative thereof to be a director or supervisor of the investee company.
II. The insurance enterprise can cast a vote in the election of directors or supervisors at the company being invested.
III. The insurance enterprise’s designee is hired as manager at the company being invested.
IV. The insurance enterprise serves as trust supervisor for securitization products being invested.
V. The insurance enterprise participates in the operation of the company being invested and the operation and management of real-estate investment trust funds being invested by means of entrustment, delegation, or a contract or agreement entered into with a third party, authorization, or other, excluding liquidation of the fund.
When an insurance enterprise is found with any of the foregoing conditions, the position held by the insurance enterprise or its representative as director or supervisor, the vote it casts, the hiring of its designee as manager, and the contract, agreement, or authorization with a third party will be invalid.
With respect to investments by an insurance enterprise pursuant to paragraph 1, subparagraphs 3 to 6 in publicly issued securities not listed on an exchange or OTC market, or in privately placed securities, the competent authority shall prescribe regulations governing eligibility conditions, scope and type of investments, investment rules, and other compliance matters.
Article 146-2
(Restrictions on Investments in Real Estate)
Investments in real estate by an insurance enterprise shall be limited to real estate that can be used immediately and from which benefit may be derived. The total amount of such investments, apart from real estate held for an insurance enterprise's own use, may not exceed 30 percent of an insurance enterprise's funds. In the case of real estate purchased for self-use, the total amount invested in by an insurance enterprise may not exceed the total amount of its owner's equity.
The acquisition and disposal of real estate by an insurance enterprise shall be evaluated by a legally established real estate appraisal organization.
When an insurance enterprise initiates social housing for rental only in accordance with the Housing Act, it will not be subjected to the restrictions of instantaneous utilization with yield as indicated in Paragraph 1
With respect to the investments in real estate of paragraph 1, the competent authority shall prescribe regulations governing internal handling procedures, restrictions and qualifications for real estates, benchmarks for immediate use and derived benefit, handling principles, and other compliance matters.
Article 146-3
(Restrictions on Loans)
Loans made by an insurance enterprise shall be limited to the following items:
1. Loans guaranteed by a bank, or by a credit guarantee institution recognized by the competent authority.
2. Loans secured by personal property or real property.
3. Loans secured by qualified securities as defined in Article 146-1.
4. For life insurance enterprises, loans secured by life insurance policies issued by said life insurance business.
For loans made pursuant to subparagraphs 1 to 3 of the preceding paragraph, the amount loaned to each borrower may not exceed 5 percent of an insurance enterprise's funds, and the total amount of all loans shall not exceed 35 percent of an insurance enterprise's funds.
Where an insurance enterprise provides a secured loan pursuant to paragraph 1, subparagraphs 1, 2, or 3 to one of its responsible persons, employees, major shareholders, or to a person having an interested party relationship with one of its responsible persons or with an employee in charge of administering the loan, the loan shall be fully secured, and the conditions may not be better than those extended to other loanees of the same class. A loan that is equal to or more than the dollar amount specified by the competent authority shall also be approved by three-fourths of the directors present at a board of directors meeting attended by at least two-thirds of the directors. The competent authority shall prescribe regulations governing the definition of interested parties, loan limits and aggregate loan balances, and other compliance matters.
The combined total amount of (i) an insurance enterprise's investment in marketable securities of a given company in accordance with Article 146-1, paragraph 1, subparagraphs 3 and 4, and (ii) loans made in accordance with paragraph 1, subparagraph 3 that are secured by the marketable securities issued by that same company, shall exceed neither 10 percent of the insurance enterprise's funds nor 10 percent of owner's equity of the company issuing the marketable securities.
Article 146-4
(Foreign Investment Limitation of Insurance Enterprise Funds)
Foreign investments of insurance enterprise funds shall be limited to the following:
1. Foreign currency deposits.
2. Foreign securities.
3. Establishment of or investment in a foreign insurance company, insurance agent company, insurance broker company, or other insurance-related enterprise approved by the competent authority.
4. Such other foreign investments as may be approved by the competent authority.
Insurance enterprises shall apply for the foreign investment value in accordance with the provisions of the preceding paragraph for its funds, which shall be approved by the competent authority based on the operation status of respective insurance enterprises. The value may not exceed 45% of the funds of each of the said insurance enterprises. The following, however, may not be included as part of the overseas investment ceiling:
1. The value of non-investment-linked life insurance products distributed in foreign currencies and not to be included as part of the overseas investment ceiling with prior approval from the competent authority.
2. The value for foreign currency denominated listed or over-the-counter certificates of domestic stocks or bonds that are invested in by insurance enterprises in accordance with provisions of the Act.
3. The value of insurance-related enterprise established by or invested in by insurance enterprises and not to be included as part of the foreign investment ceiling with prior approval from the competent authority.
4. Other foreign investments and their values with prior approval from the competent authority.
The competent authority shall prescribe regulations setting forth investment rules, investment limits, review procedures, and other compliance matters pertaining to foreign investments of insurance enterprise funds. The competent authority may, according to the financial conditions, risk management and regulatory compliance of insurance enterprise, impose a limit on the amount of investment in accordance with the provisions of Subparagraph 2 in the preceding paragraph.
Article 146-5
(Allocations of Insurance Enterprise Funds)
Insurance enterprise allocates funds to special projects and investments in public utilities and social welfare enterprises, it shall be approved by the competent authority or submitted documents for subsequent reviews. With respect to circumstances of applications for approval or subsequent reviews, the competent authority shall prescribe regulations governing required documentation, procedures, scope of and limits upon allocations and investments, and other compliance matters.
Where the funds referred to in the preceding paragraph are allocated to investment in corporate stocks, the conditions and percentages related thereto shall not be subject to the restrictions set forth in Article 146-1, paragraph 1, subparagraph 3.
Allocations of insurance enterprise funds to investments in special projects referred to in paragraph 1, the provisions of Article 146-1, paragraph 3 and 4 shall apply mutatis mutandis.
Allocations of insurance enterprise funds to investment in public utilities and social welfare enterprises referred to in paragraph 1 shall apply the following requirements:
1. Where the insurance enterprise or its representative serves as director or supervisor of the invested enterprises, the number of directors or supervisors appointed by the insurance enterprise shall not exceed two thirds of the total number of directors or supervisors of the invested enterprises.
2. The invested enterprises shall create at least one independent director as the number of directors appointed by the insurance enterprise over the half of the total number of directors of the invested enterprises.
3. The insurance enterprise shall not assign concurrently person to act as manager of the invested enterprises.
Article 146-6
(Restrictions on Investments)
When the owner's equity of an insurance enterprise exceeds the minimum capital or the minimum fund provided for in Article 139, it may, with the approval of the competent authority, invest in shares issued by insurance-related enterprises without being subject to Article 146-1, paragraph 1, subparagraph 3, or to paragraph 3 of that same article. The aggregate dollar amount of such investments may not exceed the owner's equity of the insurance enterprise.
Where an insurance enterprise makes an investment in accordance with the provisions of the preceding paragraph and it has a relationship of control or subordination with the investee company, the total dollar amount of the investment may not exceed 40 percent of the owner's equity of the insurance enterprise.
With respect to insurance enterprise investments in insurance-related enterprises made in accordance with the provisions of paragraph 1, the competent authority shall prescribe regulations defining the scope of relationships of control or subordination, the method of reporting investments, and other compliance matters.
Article 146-7
(Restrictions of Making Loans to Single Party, Single Related Party, or Related Enterprise)
The competent authority may limit the ability of insurance enterprises to make loans to, or engage in other transactions with, a single party, a single related party, or a single related enterprise. The competent authority shall prescribe regulations to set such limits, define the scope of "other transactions," and set out other compliance matters.
The term "a single party" in the preceding paragraph means a single natural person or a single juristic person. The scope of a "single related party" includes the principal, his/her spouse, blood relatives within two degrees of kinship, and any enterprise of which the principal himself/herself or his/her spouse is the responsible person. The scope of "a single related enterprise" shall be governed by Articles 369-1 to 369-3, Article 369-9, and Article 369-11 of the Company Act.
The competent authority may limit the ability of an insurance enterprise to engage in non-loan transactions with an interested party. The competent authority shall prescribe regulations defining the scope of interested parties and regulated transactions, procedures for the adoption of resolutions, limits on transaction size, and other compliance matters.
Article 146-8
(Loans)
For any prospective loan recipient listed in Article 146-3, paragraph 3 who applies under the name of another person to an insurance enterprise for a loan, the provisions of Article 146-3, paragraph 3, shall apply.
If money obtained through a loan from an insurance enterprise is used by a person using another person's name, or the money is transferred to the ownership of a person using another person's name, it shall be presumed that the loan was obtained from the insurance enterprise by the person applying in the name of another person as referred to in the preceding paragraph.
Article 146-9
(Prohibition of Shares Exchange or Tunneling of Benefits)
When insurance enterprises exercise shareholder’s rights for the securities they hold, they may not be engaged in stock right exchanges or benefits transfers and may not undermine the interest of proposers, insured parties, or beneficiaries by means of entrustment, delegation, or a contract or agreement entered into with the company being invested in or a third party, authorization, or other.
Before attending a shareholders meeting of an investee company, an insurance enterprise shall prepare an explanation of how it has evaluated and analyzed the exercise of voting rights, and after each such shareholders meeting shall submit to its board of directors a written record of the exercise of voting rights.
An insurance enterprise and any subordinate company thereof may not act as proxy solicitor for an investee company or mandate another party to act as proxy solicitor for an investee company.
Article 147
(Restrictions on the Insured Amount of Reinsurance)
The competent authority shall prescribe regulations governing the manner in which insurance enterprises cede or assume reinsurance or operate other risk spreading mechanisms, limits applying thereto, and other compliance matters.
Article 147-1
(Provisions not Applicable to the Professional Reinsurers)
An insurance enterprise that engages exclusively in reinsurance business is a professional reinsurer, and is not subject to the provisions of Article 138, paragraph 1, Article 143-1, Article 143-3, or Article 144, paragraph 1.
The competent authority shall prescribe regulations governing the business, financial, and other related management matters of the professional reinsurers referred to in the preceding paragraph.
Article 148
(Inspection of the Business and Financial Conditions)
The competent authority may, at any time, dispatch officers to inspect the business and financial conditions of an insurance enterprise, or order an insurance enterprise to report, within a prescribed limit of time, the condition of its business.
The competent authority may engage an appropriate agency or professional expert to conduct the inspection referred to in the preceding paragraph. Expenses thus incurred shall be borne by the insurance enterprise that is inspected.
In performing the tasks referred to in the preceding two paragraphs, inspectors may take any of the following actions, which the responsible person and relevant persons of the insurance enterprise may not evade, obstruct, or refuse:
1. Ordering the insurance enterprise to provide the types of documents and forms described in Article 148-1, paragraph 1, and to present evidencing documents, vouchers, books, lists, and related materials.
2. Making inquiries of the persons in charge of (and other personnel involved in) relevant business operations of the insurance enterprise.
3. Assessing the assets and liabilities of the insurance enterprise.
In performing the tasks in paragraphs 1 and 2, inspectors may, after receiving permission from the competent authority, take any of the following actions as necessary in order to investigate the facts and evidence of a case:
1. Requesting that enterprises affiliated with the insurance enterprise being inspected provide financial statements, allow inspection of their related books or documents, or permit questioning of their relevant employees.
2. Inspecting the records of other financial institutions of transactions of the insurance enterprise, its affiliates, and others whose names are suspected to have been used by it for transactions.
The scope of "affiliates" in the preceding paragraph shall be governed by Articles 369-1 to 369-3, Article 369-9, and Article 369-11 of the Company Act.
Article 148-1
(Financial and Business Reports)
At the end of every fiscal year, an insurance enterprise shall (i) compile a report detailing its operational status and the use of its funds, attaching a balance sheet, profit and loss statement, statement of changes in shareholders' equity, cash flow statement and proposal for allocation of surplus profit or compensation of deficit, and other matters designated by the competent authority, (ii) have the above items certified by a certified public accountant, (iii) submit the above items for approval at a shareholders meeting or a general assembly of cooperative members, and (iv) thereafter submit the above items to the competent authority within fifteen days for recordation.
In addition to the financial and business reports that an insurance enterprise must submit pursuant to the preceding paragraph, the competent authority may, as the need arises, require either that an insurance enterprise report, within a specified time limit and observing all format and content requirements, its business and financial conditions to the competent authority or an institution designated thereby, or that an insurance enterprise furnish account books, statements, vouchers, or other related financial and operational documents.
Standards governing preparation of the financial reports referred to in the preceding two paragraphs shall be prescribed by the competent authority.
Article 148-2
(Explanatory Documents and Material Information)
An insurance enterprise shall, in compliance with regulations, truthfully prepare explanatory documents detailing the enterprise's financial and business matters, and shall make such documents publicly available for inspection.
If an insurance enterprise becomes aware of any material information with a bearing upon the rights and interests of consumers, it shall report to the competent authority in writing within two days and explain the matter publicly.
The explanatory documents referred to in paragraph 1, and the contents as well as the timing and manner of disclosure of the major information referred to in the preceding paragraph, shall be prescribed by the competent authority.
Article 148-3
(Internal Control and Audit Systems)
An insurance enterprise shall establish internal control and auditing systems. Regulations governing such systems shall be prescribed by the competent authority.
An insurance enterprise shall establish internal handling systems and procedures for: assessment of asset quality; provision for various kinds of reserves; resolution of overdue loans and non-accrual loans; write-off of bad debts; and policy solicitation, underwriting, and claims settlement. Regulations governing such systems and procedures shall be prescribed by the competent authority.
Article 149
(Sanction for Violation of Laws of Insurance Enterprise)
If an insurance enterprise violates laws, regulations, or its articles of incorporation, or is suspected of improper management, the competent authority may issue an official reprimand or order it to take corrective action within a specified period of time, and may, depending on the circumstances, take the following disciplinary actions:
1. Restrict the scope of its business or funds allocations.
2. Order the insurance enterprise to suspend sales of an insurance product or products or restrict its launch of new insurance products.
3. Order the insurance enterprise to increase its capital.
4. Order removal of its managers or employees from their positions.
5. Revoke the resolutions of statutory meetings.
6. Dismiss its directors or supervisor(s), or suspend them from their duties for a certain period of time.
7. Any other necessary disposition.
If directors or supervisors are dismissed pursuant to the provisions of preceding paragraph, subparagraph 6, the competent authority shall notify the competent authority for company (cooperative) registration to revoke the registration of the directors and supervisors.
The competent authority shall assume conservatorship or receivership over the insurance enterprise, order the enterprise to suspend and wind up business, or liquidate the enterprise in the following manners:
1. When an insurance enterprise's capital is graded as being seriously inadequate, and the enterprise or its responsible person fails to complete the plan for capital increase or the corrective action plan for finance or business within the specific period required by the competent authority, the competent shall assume conservatorship or receivership over the insurance enterprise, order the enterprise to suspend and wind up business, or liquidate the enterprise within 90 days following expiration of said-noted period.
2. Where the enterprise’s finance or business gets worse seriously under the circumstances other than those referred to in the preceding sub-paragraph, the enterprise is incapable of paying its debts or fulfilling its contract obligations or is likely to undermine the rights of insured parties due to significantly deteriorating business or financial standing, the competent authority shall first mandate that the insurance enterprise submit a financial or business improvement plan. The plan must be approved by the competent authority. The competent authority may assume conservatorship or receivership over the insurance enterprise, order the enterprise to suspend and wind up business, or liquidate the enterprise in light of the varied severities of the conditions if the gains and losses or net value of the insurance enterprise show speedy deterioration or fail to show improvements despite assistance and accordingly result in the likelihood of said circumstances.
Where the insurance enterprise or its responsible person fails to complete said plan for capital increase or the corrective action plan for finance or business, or the consolidation plan within the specific period required by the competent authority, due to major domestic or international events that have a significant influence on the financial market system, the competent authority may order the insurance enterprise to set another specific time limit to complete the same or re-submit the plan for capital increase, or corrective action plan for finance or business, or consolidation plan.
In case of conservatorship, receivership, suspended business, rehabilitation, or dissolution as indicated in Paragraph 3, the competent authority may authorize another insurance enterprise, insurance-related institution, or professional to serve as conservator, receiver, rehabilitator, or liquidator. When the matters fall within the scope of the stabilization fund’s jurisdiction as indicated in Article 143-3, the stabilization fund shall cooperate in related management.
A related institution or individual mandated by the competent authority as provided for under the preceding paragraph shall not be subject to the provisions of the Government Procurement Act when handling the matters for which it was mandated.
When an insurance enterprise is placed under receivership or ordered to suspend business and undergo rehabilitation, the provisions of the Company Act pertaining to temporary managers and inspectors do not apply, and with the exception of a reorganization filed for in accordance with the provisions of this Act, any other petition for reorganization, bankruptcy, or composition shall be automatically stayed, as shall any compulsory execution proceeding.
A receiver filing for reorganization in accordance with the provisions of this Act may petition the court to hear or rule upon its petition together with any petition for reorganization filed by the insurance enterprise under receivership before it was placed under receivership. The court may as necessary question interested parties before issuing a ruling.
If an insurance enterprise has been placed under conservatorship by the competent authority pursuant to the provisions of paragraph 4, subparagraph 1, the insurance enterprise may not perform any of the following acts without the consent of the conservator:
1. Make payments or dispose of property in excess of a limit prescribed by the competent authority.
2. Enter into any contract or undertake material obligations.
3. Any other matter that would significantly affect its finances.
The relevant provisions of Article 148 shall apply mutatis mutandis to the conservator's performance of his/her duties as conservator.
The competent authority shall prescribe regulations governing the procedures for conservatorship or receivership of insurance enterprises, the duties of conservators and receivers, fee burdens, and other compliance matters.
Article 149-1
(Transfer Management Power to Receiver)
When someone is sent to receive an insurance enterprise by the competent authority, the receiver shall exercise its management power and manage or dispose of the property. The original functions of the shareholders’ meeting, Board of Directors, directors, supervisors, Board of Auditors, or similar institutions are discontinued immediately.
The receiver indicated in the preceding paragraph is entitled to take all legal and non-legal actions on behalf of the insurance enterprise it receives and may assign a natural person to exercise the said duties on its behalf. Provisions of Article 17 of the Administrative Execution Act and Article 24, Paragraph 3 of the Tax Collection Act do not apply to the performance of duties by the receiver.
Directors, managers, or persons holding other similar positions in the insurance enterprise shall transfer all account books, documents, and property relating to business and financial matters to the receiver along with a list of what has been transferred. The directors, supervisors, managers, and other staff shall be obligated to respond to the receiver's inquiries concerning business and financial matters.
Collateral warranty may be waived when the receiver files for provisional attachment or provisional injunction while performing duties.
Article 149-2
(Obligation and Duties of the Receiver)
During the period in which an insurance enterprise is under receivership, the competent authority may restrict its ability to write new business, modify or terminate in-force insurance contracts, provide proposers with loans secured by insurance contracts, or pay the surrender value of insurance contracts.
In cases of the following acts while performing duties, the receiver shall prepare substantial solutions to be approved by the competent authority in advance:
I. Carry out a capital increase, or capital decrease followed by capital increase.
II. Assign operations, assets, or liabilities in whole or in part.
III. Separation from or merge with another insurance enterprise.
IV. Restructuring to be filed for with the court when reconstruction and regeneration are possible
V. Other important matters required by the competent authority
When after evaluation, the receiver believes that it helps protect the basic rights of the insured or financial stability while the insurance enterprise is placed under receivership, the receiver may stipulate a transition insurance mechanism and solution that shall be enforced with prior approval from the competent authority.
The provisions of Article 139-1 do not apply when the receiver holds issued voting shares of the insurance enterprise placed into receivership in accordance with Paragraph 2, Subparagraph 1 or 3.
When a court receives a petition for reorganization filed by a receiver in accordance with the provisions of this Act, it may proceed forthwith to issue a ruling within 30 days on the basis of operational and final examination reports and opinions provided by the competent authority.
When an insurance enterprise is undergoing reorganization, rights arising out of its insurance contracts shall constitute preferential claims and need not be declared as rights of creditors in reorganization.
The insurance enterprises for which a receiver may file for reorganization are not limited to companies that have publicly issued stock or corporate bonds, and except as otherwise provided in this Act, the reorganization thereof shall be subject mutatis mutandis to the provisions of the Company Act relating to reorganization.
When a receiver intends to assign operations, assets, or liabilities in whole or in part in accordance with paragraph 2, subparagraph 2, if premium rates on the in-force contracts of the insurance enterprise under receivership are significantly out of line given current conditions and the other insurance enterprise will not accept the assignment unless premium rates are increased or insured amounts are reduced, the receiver may adjust premium rates or insured amounts after approval is granted by the competent authority.
Article 149-3
(Period and Termination of Conservatorship or Receivership)
The period of conservatorship or receivership shall be determined by the competent authority. If during the period of conservatorship or receivership, the reason for conservatorship or receivership ceases to exist, the conservator or receiver shall report to the competent authority and request termination of conservatorship or receivership.
When the period of receivership expires, or if the competent authority decides to terminate the receivership prior to expiration of the period of receivership, the receiver shall transfer all relevant account books, documents, and property relating to business and financial matters of the insurance enterprise to the representative of the insurance enterprise along with a list of what has been transferred.
Article 149-4
(Liquidation Procedures After Dissolution)
When an insurance enterprise organized as a company is ordered to dissolve in accordance with the provisions of Article 149, the provisions of the Company Act concerning liquidation of a company limited by shares shall apply mutatis mutandis to the enterprise's liquidation procedures unless otherwise provided in this Act. If the insurance enterprise is organized as a cooperative, the provisions of the Cooperative Act concerning liquidation shall apply mutatis mutandis, provided that if special liquidation procedures are required for any of the reasons contained in Article 335 of the Company Act, the procedures for special liquidation of a company limited by shares, as set forth in the Company Act, shall apply mutatis mutandis.
Article 149-5
(Remuneration of the Conservator, Receiver, Rehabilitator, or Liquidator)
Remuneration of the conservator, receiver, rehabilitator, or liquidator, and expenses arising from the performance of their duties, shall be borne by the insurance enterprise under conservatorship, receivership, rehabilitation, or liquidation, and shall take precedence over the rights of other creditors.
The remuneration referred to in the preceding paragraph shall be submitted to the competent authority for approval.
Article 149-6
(Restrictions on Property of the Enterprise and Persons’ Leaving the Country for an Insurance Enterprise, Its Responsible Person, or Any of Its Employees Suspected of Violating the Law)
When an insurance enterprise is ordered by the competent authority, pursuant to the provisions of Article 149, paragraph 3, into conservatorship, receivership, suspension of business and rehabilitation, or dissolution, the competent authority may instruct the relevant authorities or institutions to prohibit the insurance enterprise, its responsible person, or any of its employees suspected of violating the law, from transferring, delivering, or otherwise encumbering property of the enterprise, and may also request by letter that immigration authorities prevent such persons from leaving the country.
Article 149-7
(Provisions of an Insurance Company Limited by Shares to Take Assignment of Another Insurance Enterprise Under Receivership)
When an insurance enterprise organized in the form of a company limited by shares takes assignment of the operations, assets, or liabilities of another insurance enterprise that is under receivership pursuant to Article 149-2, paragraph 2, subparagraph 2, the following provisions shall apply:
1. For a company limited by shares, assumption in whole of operations, assets, or liabilities shall proceed upon adoption of a resolution by a majority vote of the voting rights represented at a shareholders meeting attended by shareholders representing a majority of the total issued shares. Dissenting shareholders may not request repurchase of their shares and the requirements of Article 185 to 187 of the Company Act shall be waived.
2. Notice of the assignment of creditors' rights shall be given by public announcement, and the requirements of Article 297 of the Civil Code shall be waived.
3. Where debt is assumed, the provision of Article 301 of the Civil Code requiring acknowledgement by the creditor shall be waived.
4. Where the competent authority deems that there is a need for urgent measures and that there will be no material adverse impact on market competition, the requirement to report a business combination to the Fair Trade Commission under Article 11, paragraph 1 of the Fair Trade Act shall be waived.
Where an insurance enterprise merges, pursuant to Article 149-2, paragraph 2, subparagraph 2, with an insurance enterprise under receivership, the provisions of subparagraphs 1 and 4 of the preceding paragraph shall apply, notice of merger or dissolution may be given by public announcement, and the requirements of Article 316, paragraph 4 of the Company Act shall be waived.
Article 149-8
(Duties of a Rehabilitator)
For rehabilitation of an insurance enterprise, the competent authority shall appoint a rehabilitator, and may dispatch personnel to supervise the rehabilitation.
The duties of the rehabilitator are as follows:
1. To wind up pending matters.
2. To collect assets and discharge liabilities.
3. Assign remaining properties.
When an insurance enterprise is ordered by the competent authority to suspend business and undergo rehabilitation, the provisions of Article 149-1, Article 149-2, Paragraphs 1, 2, 4, and 8 shall apply.
When an insurance enterprise takes assignment of the operations, assets, or liabilities of, or merges with, an insurance enterprise under rehabilitation, it shall comply with the provisions of the preceding article.
Article 149-9
(Public Announcement)
After being instated, the rehabilitator shall immediately make public announcement for at least three days in a daily newspaper published in the area where the insurance enterprise is located, notifying creditors to file their claims within thirty days and stating that in case of failure to file within the time limit such claims will not be included in the rehabilitation proceeding, provided that this restriction does not apply to claims known to the rehabilitator.
The rehabilitator shall immediately ascertain the status of the insurance enterprise's assets; prepare a balance sheet and list of property within three months from the expiration of the time limit for filing a claim; prepare a rehabilitation plan; submit all of the above to the competent authority; and publicize the balance sheet in a daily newspaper published in the area where the insurance enterprise is located.
During the filing period set forth in paragraph 1, the rehabilitator may not make payment to creditors, provided that employee salaries that are due are not subject to this restriction.
Article 149-10
(Creditors' Rights under Rehabilitation)
For an insurance enterprise that has been ordered by the competent authority into suspension of business and rehabilitation, creditors' rights shall not be exercised by any third party against the insurance enterprise other than through the rehabilitation proceeding set forth in paragraph 1 of the preceding article, except for rights that have been ascertained through litigation procedures.
If the distribution of payment of creditors' rights referred to in the preceding paragraph is likely to be delayed due to litigation, the rehabilitator may set aside an amount based on the rehabilitation distribution ratio, and distribute the balance of the property to other creditors.
The following creditors' rights shall be excluded from rehabilitation:
1. Expenses incurred by creditors for personal benefit while taking part in the rehabilitation proceeding.
2. Damages and penalties owed by the insurance enterprise due to non-performance of debt obligations after the day of suspension of business.
3. Criminal fines, administrative fines, and arrears fees.
Those holding pledges, mortgages, or liens on property of the insurance enterprise prior to the day of suspension of business shall enjoy the right of exclusion with respect to such property. Creditors with the right of exclusion may exercise their creditors' rights independently of the rehabilitation proceeding, provided that for debts that remain unsettled after exercise of the right of exclusion, such creditors may file a claim in accordance with the rehabilitation proceeding.
Expenses and debts incurred by the rehabilitator in the execution of rehabilitation duties have priority over payment of creditors, and shall be reimbursed on a running basis from the property of the insurance enterprise under rehabilitation.
The limitations period for claiming payment for creditors' rights shall be interrupted from the time that a claim is filed or that rights known to the rehabilitator are included in the rehabilitation pursuant to paragraph 1 of the preceding article, and shall resume from the day the rehabilitation is completed.
Where a creditor has received payment through the rehabilitation proceeding, right of claim against the insurance enterprise for the portion of credit not fully paid up shall be deemed extinguished. After completion of rehabilitation, if distributable property is discovered, supplemental distribution shall be carried out. If there is any balance after paying those creditors who are listed in the rehabilitation proceeding, the creditors referred to in paragraph 3 shall be entitled to claim it.
Article 149-11
(Relevant Provisions After Rehabilitation)
When an insurance enterprise is ordered by the competent authority to suspend business and undergo rehabilitation, after rehabilitation liquidation in accordance with the provisions of the Company Act or the Cooperative Act is not required.
Within fifteen days of completion of the rehabilitation, the rehabilitator shall: prepare a revenue and expense statement, a profit and loss statement, and various account books for the rehabilitation period; publicize the revenue and expense statement and the profit and loss statement in newspapers published in the area where the insurance enterprise is located, and on a website designated by the competent authority; and submit a report to the competent authority requesting that it revoke insurance the enterprise's business permit.
After rehabilitation is completed, the insurance enterprise shall use the date its permit is abolished by the competent authority as the date when voidance of registration is applied for with the competent authority for companies or cooperatives, with the date for closing of an account for the immediate term being applied for in accordance with the provisions of Article 75, Paragraph 1 of the Income Tax Act.
Article 150
(Revoking the Business License After Dissolution and Liquidation)
When an insurance enterprise is dissolved and liquidated, its business license shall be revoked.
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