Newsletter
The Financial Supervisory Commission (FSC) broadens "insurance-related businesses" investment scope for insurers
The Financial Supervisory Commission (FSC) issued an interpretative ruling (Ref No.: Jin-Guan-Bao-Cai-Zi: 11401456501) on October 27, 2015, stating that businesses that engage in “health checkup centers, health management consulting, pharmacy distribution, health and medical big data analysis, health and medical digital platform development, health and medical software development, health and medical Internet of Things (IoT) applications, long-term care assistive device products, and long-term care ancillary services, and that are related to the insurance industry's claims settlement, underwriting, policyholder services, or insurance product benefit items" and meet the requirements of "health and welfare businesses" are considered "other insurance-related businesses recognized by the competent authority" under Paragraph 4 of Article 164 of the Insurance Act.
According to the ruling, the aforementioned "health and welfare businesses" shall comply with the following provisions:
(1) The annual operating costs or operating revenue of the enterprise derived from the aforementioned business or other businesses that qualify as "insurance-related businesses" as defined in Paragraph 4 of Article 164 of the Insurance Act must account for at least 51% of the annual total operating costs or total operating revenue of the enterprise. However, this restriction does not apply to investments made by insurance companies in such enterprises for the purpose of strategic alliances or to strengthen business cooperation, provided that such investments do not constitute "control" or "significant influence" as defined in the Insurance Industry Financial Reporting Standards.
(2) If the health and welfare enterprise is required to comply with the provisions of the first paragraph of (1) above, the insurance company shall, within one month after the end of each financial year, submit a report to the competent authority for recordation of the ratio of the annual operating costs and operating revenue of the enterprise derived from the aforementioned business or other businesses that meet the requirements of "insurance-related businesses" as defined in Paragraph 4 of Article 164 of the Insurance Act. If the requirements under the first paragraph of (1) above are not met, adjustments shall be made to meet the requirements within 2 years from the year of the report. If the adjustments cannot be completed by the deadline, the insurance company may apply for an extension of 1 year with reasons stated. If improvements are still not made by the extended deadline, the insurance company should submit a written notification to the competent authority of a shareholding disposal plan to reduce the investment amount or shareholding ratio to no more than 10% of the total paid-in capital or total issued shares of the enterprise.
Based on the aforementioned ruling that includes "health and welfare businesses" in the scope of domestic “insurance-related businesses”, and listing of "health and welfare businesses" as insurance-related businesses, such relaxation of insurance investment restrictions should help insurance companies and their investee businesses diversify and expand business through investment and various emerging collaboration models.