The amendment, which was described by Baker & McKenzie in a recent note to clients as “an important development for those who issue or market offshore policies to Taiwan residents”, increases the maximum punishment for violators to up to three years imprisonment and a fine of NT$20m (approximately $666,667).
Previously, the maximum punishment would have been an administrative fine of up to NT$4.5m (approximately $150,000), Baker & McKenzie said.
The amendment was described by people familiar with the matter as the latest in a series of regulatory tweaks by the Taiwanese regulator in the wake of the global financial crisis, to ensure that the problems some people have encountered with faulty financial products will not reoccur.
They said large insurance companies based elsewhere, such as the likes of Prudential and Metropolitan Life, typically will not be affected by the new regulations, as their products are likely to already be designed for the Taiwanese market and approved for sale there.
Boost for local insurers
A desire to help local insurance companies that sell locally-designed and approved products to Taiwanese residents – by making it harder for unregulated competitors, with generic products, to undercut them – is also thought to have been behind the changes.
This is because companies that at present have only a small share of the Taiwanese market are thought unlikely to be inclined to invest in a new range of life insurance products that would be tailored just to accommodate Taiwan’s specific actuarial profile.
Under Taiwanese law now, any insurance policy that is distributed or sold in Taiwan must be issued by an insurer holding a local insurance licence, while its policies must be registered with or approved by the Insurance Bureau (IB) of Taiwan’s Financial Supervisory Commission.
‘Not surprised’
“We are not surprised by this amendment,” Baker & McKenzie said in its note to clients, adding that it was “consistent with the IB’s express policy to discourage Taiwan residents from purchasing offshore insurance policies and other unapproved offshore financial products”.
“We expect that this change will give the IB more ammunition in its oversight over the marketing and distribution of offshore insurance products.
“Foreign companies and financial institutions interested in the Taiwan market will need to either move some of their portfolio onshore, or re-examine their internal compliance policies in order to avoid suffering criminal penalties.”
Michael Wong, a principal with Baker & McKenzie’s office in Taipei, noted that Taiwan’s legislators and regulators have been responding to public concerns with new regulations, like this one, ever since the downturn and the collapse of the Lehman Brothers investment bank in 2008.
“A lot of people got burned, and said to the regulator, ‘look at this thing that was sold to us, we thought we were going to get this, but look at it now’.”
Population of 23 million
An island off the southeast coast of China, Taiwan, with an area of 35,980sq km, is larger than Wales (20,780sq km), with more than seven times Wales’s population (23.1 million). The official language is Mandarin, and unlike Hong Kong, it does not have a history as a British colony, but rather, has at various times been ruled mainly by various Chinese and Japanese entities.
