Asia Pacific Insurance

Taiwan

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Insurance Regulatory Landscape and Key Considerations for M&A Transactions
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Insurance Regulatory Landscape and Key Considerations for M&A Transactions Start Comparison
Who is the main regulator with oversight of insurance companies?

Insurance Bureau of the Financial Supervisory Commission (IB)

Are there foreign ownership limitations for insurance companies? Are there shareholding caps on individuals and/or corporate bodies for insurance companies? If in the affirmative, is this encapsulated within statute or a matter of policy?
No.
However, according to the Insurance Law of Taiwan, any shareholder that wishes to acquire more than 10%, 25% or 50% share in an insurance company must meet various qualifications and be specifically approved by the IB.
Can an insurance company carry on a composite business (i.e., life and non-life)? Is this encapsulated in statute or a matter of policy?
No (a matter of law).
 
However, this restriction does not apply where a non-life insurance company is approved by the IB to engage in personal injury insurance or health insurance.
Are there other conditions imposed by the regulator in doing an M&A transaction?

If any investor, along or acting in concert with others, plans to acquire more than 50% of the total issued shares of an insurance company, the IB will require the investor(s) to, among other things:

  • Issue a letter of long-term commitment for at least 10 years, which shall include at least the following: (i) an undertaking for long-term operation (i.e., holding the shares of the target insurance company for 10 years or more); (ii) the motives and purposes of acquiring the target insurance company shares; (iii) legally binding documents to show how to ensure the suitability and structural stability of shareholders; and (iv) if the investor has affiliates involved in the acquisition, the investment structure of the investor and its affiliates; and
  • Provide a description of how the investor has sufficient financial capability to meet the capital injection needs of the target insurance company in the next 10 years: based on our experience, the IB may request the investor to deposit a certain amount of fund or assets with an escrow agent to show the investor's commitment for capital injection into the target insurance company for the next 10 years.
Is dispensation given for fulfillment of these conditions and in what circumstances?

Generally no.

Is there a single presence policy and is it imposed under statute or policy? Is dispensation given and what criteria will the regulator consider?

Yes, under policy.

A dispensation is given on a case-by-case basis. The Taiwan regulators normally grant a dispensation of between six and 12 months.

What approvals are required for a foreign entity to take a stake in an insurer? Is there a distinction between a share deal or an asset deal?

Share deal

IB approval is required when an investor will acquire more than 10% shares in the target insurance company. The approval of the Investment Commission is required if: (i) the investor is a foreigner and the target insurance company is not a listed company; or (ii) if the target insurance company is a listed company and a foreign investor will acquire more 10% or more shares in this insurance company.

Asset deal

IB approval is required. The Investment Commission is required in case: (i) the asset deal will change the investment plan previously submitted by a foreign investor to the Investment Commission; or (ii) any foreign investor will inject capital to a local entity for completing the transaction.

How long will regulatory approvals typically take for a share deal versus an asset deal?

This will take two to six months (the estimated time frame does not differ between a share deal and an asset deal).

How open is the regulator to private equity participation in an insurer?

There is no statutory restriction.

The IB would generally favor a strategic investor over a private equity investor because the former may provide more resources and capital to the local insurance companies. In 2010, the IB (via the Investment Commission) rejected an application filed by a private equity investor.

Is there a financial holding company concept (FHC) or other equivalent status? What are the implications?

Yes. The Financial Holding Company Act permits an FHC to concurrently own bank, securities and insurance subsidiaries (at least two of them). If the total assets of the target insurance company exceeds NTD 300 million (approximately USD 10 million), the acquirer must be an FHC established under the Financial Holding Company Law or recognized as a foreign financial holding company.

More stringent requirements (such as related parties’ transactions) set out in the Financial Holding Company Act apply to the FHC and its subsidiaries.

What are the typical modes of distribution for insurance companies?

Agency force, brokers, telemarketing and bancassurance

Is bancassurance a popular mode of distribution? What approvals are required? What are the main parameters in negotiating a bancassurance agreement?

Yes, bancassurance is a popular mode of distribution. Banks conducting a bancassurance business must obtain an insurance agency or brokerage license from the IB or approval from the Banking Bureau. In addition, a person who sells must be a bank employee who holds an individual insurance solicitor license.

The salient terms are:

  • Fees and commissions
  • Products
  • Term and renewal
  • Risk allocation
What are the top challenges in closing an insurance M&A transaction (share deal versus asset deal)?

Share deal

  • Compliance with documentary and other submissions that may be required

Asset deal

  • Obtaining an insurance license
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