Newsletter
Draft Amendments to "Regulations Governing Use of Insurer's Funds in Special Projects, Public Utilities and Social Welfare Enterprises"
To enable insurers to mobilize and deploy funds to participate in investment in public utilities and social welfare enterprises, relieve government of some financial burden, enhance quality of public infrastructure and social welfare services and promote development of related industries, the Legislative Yuan enacted the Regulations Governing Use of Insurer's Funds in Special Projects, Public Utilities and Social Welfare Enterprises (the "Regulations") on December 26, 2001, as authorized by Article 146-5 of the Insurance Act to govern the scope of investment and cap the amount of insurers' funds in special projects, public utilities and social welfare enterprises. The Regulations also stipulate the relevant documents, procedures and other matters for insurers to apply for regulatory approval, such as the investment targets of an insurer shall be profitable and the types of registration shall be restricted to companies limited by shares or limited partnership; insurers can, without prior approval, invest in special projects, public utilities and social welfare enterprises directly and report to the Financial Supervisory Commission (FSC) as a post-filing under certain circumstances.
To speed up channeling insurers' funds into investments in public utilities, promote efficiency of deploying insurers' funds and simplify administration procedures, as well as preventing insurers from evading insurance law provisions by investing in venture capital firms, on November 4, 2019, the FSC released these draft amendments to the Regulations Governing Use of Insurer's Funds in Special Projects, Public Utilities and Social Welfare Enterprises, Ref. No. Jin-Guan-Bao-Cai-Zi No. 1080495663. Highlights of these draft amendments are as follows:
I. Article 7 of the draft amendments:
To strengthen control and management scheme of insurer's investments in venture capital firms and prevent insurers from evading insurance law provisions by investing in venture capital firms, it is specified that insurers' investments in venture capital firms shall comply with regulations including:
1. In the event that the insurer invests in venture capital firms listed in item 1, paragraph 2 of Article 5 and item 1 of Article 2 and holds shares in the venture capital firm(s) jointly with its interested parties or by other means to form a controlling and subordinate relationship with the venture capital firm(s), the insurer shall comply with the following regulations:
(1)The insurer shall not intervene in the management and investment decision making of the venture capital firm and enterprises invested by the venture capital firm either directly or indirectly through the venture capital firm or by other methods; and
(2)The aggregate amount of shares issued by the same public company in accordance with item 3, paragraph 1 of Article 146-1 of the Insurance Act held by the insurer and the venture capital firm shall not exceed the limitation stipulated in item 3, paragraph 1 of Article 146-1 of the Insurance Act.
2. In reference to shares which are issued by the same public company in accordance with item 3, paragraph 1 of the Article 146-1 of Insurance Act mentioned above, it shall be calculated based on the insurer's stake (normally expressed in percentage terms) in the venture capital firm. If investment exceeds the statutory cap, it shall be handled in accordance with the following regulations before the situation is corrected:
(1)Shares held by the insurer shall not be increased; and
(2)The aggregate amount of shares held by the insurer and the venture capital firm shall not be increased.
II. Article 10 of the draft amendments:
To simplify administrative procedures and channel insurers' funds into domestic public utilities, promote the efficiency of deploying insurers' funds in said public utilities, the filing threshold for post-investment check is eased and investments made by insurers in accordance with the Act for Promotion of Private Participation in Infrastructure Projects in which the private company is a limited partnership may file for post-investment check.