PROMULGATION OF THE GUIDELINES FOR CUSTODIANS OF THE SEPARATE ACCOUNTS FOR INVESTMENT-LINKED INSURANCE PRODUCTS AND THE UNDERLYING INVESTMENTS

11/01/2009

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In order to ameliorate the development of investment-linked insurance products, the Financial Supervisory Commission promulgated the Guidelines for Custodians of the Separate Accounts for Investment-Linked Insurance Products and the Underlying Investments (the "Guidelines") on October 14, 2009. Listed below are the major points of the Guidelines:
	l	The credit rating of a custodian of the separate accounts for investment-linked insurance products should reach the level described in Point 2 of the Guidelines (Point 2).
	l	The respective credit ratings of the bonds, structured notes and foreign mortgage-backed securities to which an investment-linked insurance product is linked should reach the applicable levels described in Point 3 of the Guidelines (Point 3).
	l	If an investment-linked insurance product is linked to foreign structure notes, such notes must comply with the Regulations Governing Foreign Structured Notes and relevant regulations (Point 4).
	l	The underlying investment of an investment-linked product and the utilization of the underlying assets in a separate account cannot involve any securities that are issued via private placement (Point 5).
	l	If an investment-linked insurance product is linked to domestic structured notes, such notes must comply with Point 6 of the Guidelines (Point6).
	l	If an investment-linked insurance product is linked to offshore bonds, such bonds cannot be denominated in New Taiwan dollars or be used to invest in bonds issued by Taiwanese companies in foreign markets; such bonds are subject to relevant securities investment rules in the PRC, Hong Kong and Macau (Point 7).
	l	ETFs that are traded on foreign securities markets and that are linked to investment-linked insurance products are confined to securities and bonds; neither short sales nor leverage is allowed (Point 8).
	l	The insurer should evaluate periodically the credit risks of the underlying investment of its investment-linked insurance products and notify the applicant in due course (Point 9).
	l	The insurer should establish a mechanism to evaluate and diversify the credit risks of the institution issuing, guaranteeing or managing the underlying investment. The insurer should also establish a recovery procedure and contingency plan in case the institution issuing or managing the underlying investment is bankrupt (Point 10).