New Financial Reporting Requirements for Taiwan Insurers

by WP

The Financial Supervisory Commission has released amendments to two parallel sets of directives regulating financial reporting requirements for life insurers and asset insurers. A publicly report insurer may now rely on the professional judgment of its accountant to determine whether companies in which the insurer has invested must also be audited by the insurer’s accountant.

Previously, a relatively rigid set of criteria such as capitalization or revenue of the invested company triggered the auditing requirement. Winkler Partners believes that this new requirement may actually cause greater caution and concomitant scrutiny of financial records by Taiwanese CPAs because the emphasis on professional judgment opens up an increased risk of malpractice or administrative liability for accountants. To learn more about medical malpractice lawsuits, read more here.

In addition, insurers are now required to report precise figures for compensation of all directors, supervisors, and CEOs (general manager in Taiwan nomenclature) under certain circumstances. These circumstances include a capital adequacy rate of less than 200%, after-tax losses for two consecutive years, or failure to increase capital after being ordered to do so by the Commission. The insurer must also report exact compensation of individual director, supervisor, or CEO if the individual pledges more than 50% of the shares she holds or does not hold a minimum number of shares over a three-month period. These new requirements take effect retrospectively as of 1 January 2008.

Previously, all insurers were required to disclose compensation ranges for directors, supervisors, and CEOs by class rather than individual. If the circumstances listed in the preceding paragraph do not apply to an insurer, the insurer may continue to report compensation ranges, rather than exact figures. The new requirements are part of a general trend by the Commission to regulate the activities and qualifications of the directors, supervisors, and officers of financial institutions and listed companies.

The new amendments are to the Directions Governing the Preparation of Financial and Business Reports by Non-life Insurance Industry and the Directions Governing the Preparation of Financial and Business Reports by Life Insurance Industry.

For more information on the new directives or the Winkler Partners insurance practice, please contact Chen Hui-ling.