Newsletter
INSURANCE ACT AMENDED
In response to the development of the insurance market, and to enhance the supervision and regulation of insurers' financial status and sales activities, the amended Insurance Actwas prom-ulgated on 18 July 2007. The main points are outlined below:
．Reinsurance
A new provision is added to Article 40 whereby the party insured under an original insurance contract may claim indemnification from a reinsurer if both the original insurance contract and the reinsurance contract contain provisions to that effect.
．Public share issuance
The new Paragraph 5, Article 136 provides that if an insurance enterprise is organized as a company limited by shares, its shares should be publicly issued except where otherwise provided by law or by permission of the Fi-nancial Supervisory Commission (FSC). This provision is intended to promote transparency of insurers' finances, in the interests of finan-cial soundness and regulatory transparency. It is understood that the FSC is currently drafting rules to define the conditions for exemption from public issuance of shares.
．Investments
The limit under Article 146-4 on the propor-tion of an insurance enterprise's funds that may be used for overseas investments is raised from 35% to 45%. New provisions are added to Article 146-1 whereby an insurance enter-prise that makes equity investment in another company may not be a director or supervisor of such company, and may not support the appointment of a related party of the insurer as a director or supervisor of an invested finan-cial institution. The new Article 146-9 pro-hibits an insurer from soliciting proxies for voting at a shareholders' meeting of an in-vested company, and prescribes procedures to be followed by an insurer when exercising its voting right.
．Scope of business
Various articles are amended to expand the scope of business activities open to insurance enterprises: Article 138 now allows insurers to engage in health insurance business. Articles 138-2 and 138-3 allow insurers toadminister the business of insurance payments held in trust, to ensure that minors and persons of in-sufficient mental capacity are able to receive the insurance benefits due and payable to them. Article 146 permits insurers to offer invest-ment-type insurance and worker pension fund annuity insurance, and other discretionary investment business in accordance with the Securities Investment Trust and Consulting Act.