GUIDELINES FOR ISSUING BONDS WITH CAPITAL CHAR-ACTERISTICS BY INSURANCE ENTERPRISES

03/01/2009

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Financial Supervisory Commission promulgated the Guidelines for Issuing Bonds with Capital Characteristics by Insurance Enterprises on December 9, 2008.  The main points are summarized as follows:

       

	Ÿ	"Bonds with capital characteristics" shall mean convertible bonds, non-accumulated no-maturity bonds and accumulated no-maturity bonds whose terms of maturity are not less than five years, subordinate to other corporate debts, and without guarantee or collateral by the insurance company or its affiliates.  "Convertible bonds" shall mean subordinate bonds: (i) whose terms of maturity are within ten years; and (ii) which must be converted into common shares or permanent preferred shares upon maturity and prior to maturity can only be converted into common shares or permanent preferred shares; conversion in any other form must be approved by the competent authorities.  (Article 2)
	Ÿ	Criteria for an insurance company that may apply to the competent authorities for issuance of bonds with capital characteristics are as follows:
		1.	No more than three material disciplinary actions by the competent authorities within a year prior to the application for issuance or the accumulative fines are less than NTD10 million, or violation has been rectified and recognized by the competent authorities.
		2.	Within a year prior to the application for issuance, the credit rating of the issuing company or its corporate bonds reaches twBBB- by Taiwan Ratings or equivalent.
		3.	Private placement is exempt from the credit rating criteria of the issuing company or corporate bonds.  Purchasers of privately placed bonds and transferee of such bonds are limited to those who are capable of risk management, and the issuing company must conduct reasonable investigation on their qualifications.  (Article 3)
	Ÿ	An insurance company must first apply to the competent authorities for issuance of bonds with capital characteristics and then issue the bonds in accordance with the Company Act, the Securities and Exchange Act and relevant regulations upon approval of the competent authorities.  If the bonds with capital characteristics are denominated in a foreign currency, the issuance must be conducted in accordance with relevant regulations by the Central Bank of the Republic of China (Taiwan).  (Article 4)
	Ÿ	An insurance company must also comply with the provisions under the Company Act, the Securities and Exchange Act, the Regulations Governing the Offering and Issuance of Securities by Securities Issuers and the Regulations Governing the Offering and Issuance of Overseas Securities by Issuers.  (Article 5)