Newsletter
Amendment of the Regulations Governing the Implementation of Internal Control and Audit System and Business Solicitation System of Insurance Agent Companies and Insurance Broker Companies
Since the main businesses of insurance agents and insurance brokers is to solicit or negotiate insurance contracts, and the related channels have become the main sales and marketing channels, the businesses of insurance agents and insurance brokers have significant impact on consumer rights. In order to enhance the operation of insurance agent companies and insurance broker companies (the Companies"), and to establish internal control systems for related operations, so as to set important standards for management self-inspection audit systems, the Financial Supervisory Commission (FSC) amended certain provisions of the Regulations Governing the Implementation of Internal Control and Audit System and Business Solicitation System of Insurance Agent Companies and Insurance Broker Companies" (the "Regulations”) based on the announcement Ref. No. Jin-Guan-Bao-Zong No. 10704566001 dated October 17, 2018. The main points are as follows:
1. Independent auditor and internal control system:
According to articles 9, 24 and 27 of the Regulations, in considering the business characteristics and scale, the competent authority may order the Companies or the banks concurrently operating insurance agent business or insurance broker business with approval of the competent authority (“the banks”) to entrust an independent auditor to audit the internal control system, if necessary.
2. Appointment, dismissal or transfer of auditors:
According to paragraph 5 of article 10 of the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries applicable to banks, the appointment, dismissal or transfer of auditors shall be signed off by the audit supervisor and approved by the board of directors (council) (the "Rules"). To be consistent, the FCS amended article 12 of said Rules, stating that the appointment, dismissal or transfer of auditors of banks shall comply with said Rules.
3. Audit report and review process:
Under current rules, the Companies and the banks concurrently operating insurance agent business or insurance broker business shall submit their internal audit reports to each supervisor (board of supervisors) or audit committee for review, and report the same to the board of directors (council). However, the foregoing is not consistent with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries and the Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises, applicable to banks and insurers respectively and not requiring the internal audit reports be submitted to the board of directors (council). The amendment deleted the reporting requirement.
4. Consolidated statement on internal control of banks:
Under current rules, banks concurrently operating insurance agent business or insurance broker business shall issue statements on internal control for both the banking business and insurance business in accordance with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries. To simplify the administrative process, as well as to comply with the relevant regulations of banks, article 23 was amended to require consolidated statement on internal control of the banks and their insurance businesses.