Article 146 of the Insurance Act ("IA") sets limits on funding allocations of an insurance company, though its funds may be allocated to "insurance-related businesses." To maintain the flexibility of fund allocation of insurance enterprises, Paragraph 4 of Article 146 of IA added "other insurance-related businesses as recognized by the competent authority" within the scope of insurance-related businesses. The Financial Supervisory Commission (FSC) issued the new "Insurance-related Businesses as Recognized by the Competent Authority", per the letter Ref. No. Jin-Guan-Bao-Cai-Zi No. 10402507581 dated 7 October 2015. The main points are as follows:
1. The amendment expands the scope of "insurance-related businesses" to Financial Services Technology Business ("Fintech venture") engaging in big data analysis, interface design, software development, the internet of things (IoT) and the wireless communication business and meeting the following requirements:
(1) The annual operating costs of or revenue from financial enterprises (including financial holding companies, banks, securities, insurance companies and subsidiaries thereof) and financial services of the Fintech venture invested by the insurance company shall exceed 51% (inclusive) of the total operating costs or revenue of such Fintech venture ("51% Threshold"). Provided that, for the purpose of strategic alliance or business cooperation, if the investment in the Fintech venture brings the insurance company no "control" or "significant influence" as set forth in the Regulations Governing the Preparation of Financial Reports by Insurance Companies, the 51% Threshold need not be met.
(2) If the Fintech venture shall meet the 51% Threshold, the insurance company shall report the ratio of the annual operating costs and revenue of the Fintech venture accounted for by financial enterprises and financial services to the competent authority for reference within one month after the end of each fiscal year. A Fintech venture failing to meet the 51% Threshold shall rectify within two years of the reporting year and may apply for extension of up to one year. If the Fintech venture fails to rectify within the said period, the insurance company shall report its plan to lower its investment or shareholding to less than 10% of the Fintech venture's total paid-in capital or total outstanding shares to the competent authority.
2. The main business of a Fintech venture invested by an insurance company shall not be manufacturing, distribution and lease of hardware and equipment. The hardware and equipment provided by such Fintech venture shall be relevant within the scope of the main business of such Fintech venture and shall be in connection with the programming and software design related to insurance.
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