With an aim to deregulate offshore insurance unit (OIU) business, the Taiwan Offshore Banking Act was modified on 4 February 2015 to allow Taiwan insurers to sell policies to foreign clients through their OIUs.
Accordingly, the Financial Supervisory Commission (the FSC), together with the Central Bank, amended the Offshore Banking Act Enforcement Rules and the Regulations for Offshore Insurance Unit to set forth rules for applying for permits to set up OIUs. The FSC has since approved seven major local insurance companies to set up their OIUs as of 26 June 2015.
OIU’s Business
An OIU may only conduct the following types of business:
1. The following types of foreign currency denominated insurance business:
(1) Personal insurance business if the applicant is a natural person, juristic person, government agency, or financial institution outside the territory of the ROC and the insured is a natural person outside the territory of the ROC.
(2) Non-life insurance business if the applicant is a natural person, juristic person, government agency, or financial institution outside the territory of the ROC and the subject matter insured is not a real property located within the territory of the ROC.
2. Foreign currency denominated reinsurance business with insurance enterprises outside the territory of the ROC.
3. Other foreign currency denominated insurance-related businesses serving natural persons, juristic persons, government agencies, or financial institutions outside the territory of the ROC and approved by the competent authorities.
When an OIU conducts the businesses mentioned above, it may not conduct concurrently non-life insurance and life insurance businesses, unless its head office is a non-life insurance enterprise that has been approved by the FSC to engage in injury insurance and health insurance.
Operating requirements and advantages for OIUs
An OIU shall be allocated minimum US$2 million operating working capital and shall use separate accounting systems, ie use separate accounting documents, establish separate account books, and prepare separate accounting statements, and none of them may be mixed with those of the head office or other branches of the same insurance company.
To encourage insurance industry innovation and attract offshore business, product-related rules are relaxed as summarised below:
1. Submission of product for approval: After selling an insurance product, a report on the matter shall be filed with the FSC or an institution designated by it in 15 days.
2. Principles of insurance product design: The premium rate shall correspond to the adequacy, rationale, fairness and actuarial principles, and reflect any and all costs and reasonable profit. Moreover, sound risk control mechanisms shall be in place. The denomination currency shall not be New Taiwan Dollar.
All these efforts are made to boost Taiwan’s OIU business, encourage Taiwan insurance companies to develop innovative and competitive policies, tap into offshore insurance markets and take advantage of wealth management business opportunities in the Asia-Pacific region.