2016: Insurance Regulation in Asia Pacific: Ten Things To Know About 20 Countries

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2016: Insurance regulation

in Asia Pacific
Ten things to know about 20 countries
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2016: Insurance regulation
in Asia Pacific
Ten things to know about 20 countries
A Norton Rose Fulbright guide

as at January 1, 2016
Preface
We are pleased to present the 2016, and the third edition of Insurance regulation in Asia
Pacific – Ten things to know about 20 countries. Thank you to our clients, contacts and
regulators for your support and contribution.
The purpose of this guide is to provide an overview and practical checklist of ten common
regulatory issues for insurance companies on which we frequently are asked to advise
upon for the key Asia Pacific jurisdictions where most of our clients operate or in which
they are interested in expanding. It identifies the regulator and whether branches of foreign
insurance companies are permitted or only locally incorporated companies. Any restriction
on foreign direct investment is highlighted along with the controller regimes (shareholders
and management) and whether a notification or approval from the regulator is required
upon proposed or actual change of control and the thresholds thereof. Also addressed is the
nature of the regulatory capital regime, whether there is group supervision and policyholder
protection, and whether outsourcing is subject to regulatory oversight. We aim for this guide
to be a useful first stop for generic advice on the topics covered.
The information is up to date as at January 2016. It is not a substitute for considered legal advice.
If you would like further information on any of the matters covered here, please do get in
touch with me or the relevant contributor.
Anna Tipping
Partner
Acknowledgements
The chapters on Australia, China, Hong Kong, Singapore and Thailand have been provided
by Norton Rose Fulbright. We gratefully acknowledge the assistance of the law firms who
have contributed to the chapters on Cambodia, India, Indonesia, Japan, Macau, Malaysia,
Mongolia, Myanmar, New Zealand, Papua New Guinea, Philippines, South Korea, Sri Lanka,
Taiwan and Vietnam. These firms are identified at the start of each section and further details
on the contributors are given at the end of the guide
Contents
Australia 06
Cambodia 08
China 10
Hong Kong 12
India 15
Indonesia 17
Japan 19
Macau 21
Malaysia 23
Mongolia 25
Myanmar 27
New Zealand 28
Papua New Guinea 30
The Philippines 32
Singapore 34
South Korea 36
Sri Lanka 38
Taiwan 40
Thailand 42
Vietnam 43
2016: Insurance regulation in Asia Pacific – Ten things to know about 20 countries
Australia
Contributed by: Norton Rose Fulbright
01 | The regulator 04 | Change of control approvals

The Australian Prudential Regulation Authority (APRA) is In addition to the FDI restrictions, an entity that holds an
the prudential regulator, and the Australian Securities and AFSL must notify ASIC of any change in control within 10
Investments Commission (ASIC) is the consumer protection business days after the change occurs. ‘Control’ includes
regulator, for the insurance industry. having more than 50 per cent of the votes or shares in the
entity or having the capacity to appoint its directors or
General and life insurers and reinsurers carrying on business determine its financial operating policies.
in Australia must be authorised by, or registered with, APRA.
05 | Minimum capital
Insurers, insurance brokers, agents and other distributors The APRA prescribed minimum capital amounts for insurers are:
must hold an Australian financial services licence (AFSL)
issued by ASIC, be authorised by a licensee or rely on an • Life insurer – A$10 million
exemption from the licensing requirements. • General insurer – A$5 million (A$2 million for captives).
A reinsurer may operate from abroad without registering There are no minimum capital requirements for insurance
with APRA or holding an AFSL. brokers, agents and financial advisers.
A$1.37 = US$1.00 as at January 1, 2016
Responsibility for the prudential supervision of private health

insurers has recently transferred to APRA from the Private 06 | Risk based capital – insurers
Health Insurance Administration Council. APRA adopted the An insurer must have capital in excess of its Prudential
prudential framework of the previous regulator, but may Capital Requirement (PCR).
change that framework going forward.Relevant legislation
and regulation is primarily made at the Federal level. The PCR is the prescribed capital amount plus any supervisory
adjustments made by APRA in respect of each insurer.
02 | Subsidiary/branch
A foreign life insurer may establish a locally incorporated The prescribed capital amount can be calculated using either
subsidiary to carry on life insurance business in Australia. APRA’s ‘Standard Method’ or an internal model approved by
Alternatively, a US registered life insurer may seek to operate APRA. The Standard Method calculates the capital amount
in Australia through a branch as an Eligible Foreign Life based on insurance risk, asset risk, asset concentration risk
Insurance Company (EFLIC). and operational risk.
A foreign general insurer may establish a locally Life insurers additionally have a separate solvency
incorporated subsidiary to carry on insurance business in requirement. Under the solvency requirements, a life
Australia (foreign-owned subsidiary) or it may establish a insurer’s statutory fund must have a capital base that
branch (branch of foreign insurer). exceeds 90 per cent of the fund’s prescribed capital amount.
EFLIC, foreign-owned subsidiaries and branches of foreign 07 | Group supervision

insurers are subject to the same APRA requirements as APRA has the power to authorise (in the case of a general
Australian insurers but have different governance requirements. insurer) or register (in the case of a life insurer) an Australian
incorporated non-operating holding company (NOHC) which
03 | FDI restrictions owns at least one Australian authorised/registered insurer.
Generally, approval of the Foreign Investment Review Board
must be obtained prior to any foreign person acquiring An ‘insurance group’ exists if an Australian insurer has
a direct or indirect interest of 15 per cent or more in an controlled entities or is itself the subsidiary of an authorised/
Australian company through the acquisition of shares or registered NOHC. This provides APRA with some level of
assets in the Australian company or any offshore parent of control over the group that the insurer or NOHC manages.
that company. Most of APRA’s powers that apply to an insurer, also apply to
a NOHC.
06 Norton Rose Fulbright – January 2016

Australia-
APRA can impose directions on the insurer or NOHC to take 10 | Outsourcing

specified actions in relation to their subsidiaries. If an insurer outsources any material business activity, it
must implement a written policy, approved by its board of
Furthermore, APRA has recently extended its supervisory Directors, to monitor and manage the outsourcing arrangement.
powers over Australian established non-APRA-regulated A ‘material business activity’ is one that may, if disrupted,
institutions that are part of a conglomerate group that have a significant impact on the insurer’s business operations
carries on insurance business in Australia. Currently, APRA or its ability to manage risks effectively. Generally, material
has direct oversight of all such entities within those groups outsourcing arrangements must be documented in a legally
in the areas of group governance and risk management. binding agreement, which must include terms relating to the
This means that APRA will have direct oversight of all of services to be provided, fees, liability, as well as review and
the Australian subsidiaries of an insurer or NOHC. It is audit procedures. Outsourcing to offshore service providers
also proposing to extend these powers in the areas of risk may be permitted after consultation with APRA.
exposures and capital adequacy, which are expected to come
into effect within the year.
08 | Policyholder protection
Life insurer
Life insurers are required to maintain statutory funds, which
act as a mechanism for quarantining the life insurance
business of the company from any other business of the
company.
General insurer
APRA administers the Financial Claims Scheme (FCS), which
makes payments to certain policyholders with valid claims
on an insolvent general insurer. The Government funds the
payments made under the scheme and then seeks recovery
from the general insurer in the winding up process. Any
shortfall may be recovered through a levy on the general
insurance sector.
09 | Portfolio transfers
Court approval
The transfer of life or general insurance business within
Australia must be carried out by a scheme confirmed by the
Federal Court of Australia.
The insurer must provide a copy of the scheme to APRA

and ASIC and an approved summary of the scheme to
each affected policy owner. A notice of intention to make
the application must also be published in the Federal
Government Gazette and advertised in the one or more
newspapers approved by APRA.
APRA approval
Alternatively, two registered life insurers may apply to
APRA for approval of a transfer of business between them
under the Financial Sector (Business Transfer and Group
Restructure) Act 1999 (Cth).
Norton Rose Fulbright – January 2016 07

Cambodia
Contributed by: Bun & Associates
01 | The regulator 05 | Minimum capital

The Insurance and Pension Division of The General Department Life or General Insurance company: SDR5 million*
of Financial Industry, being a division of the Ministry of Composite Insurance company: SDR10 million
Economy and Finance (MEF) is the insurance regulator. Micro-insurance company (life or non-life): KHR600 million
Insurance Broker: KHR200 million
Anyone carrying out insurance activities (undefined) Insurance Agent: KHR20 million
in Cambodia is subject to the new Law on Insurance, Loss Adjustor: KHR20 million
promulgated on August 04, 2014, replacing that of * SDR = IMF special drawing rights. SDR 1 = US$1.39 as at January 1, 2016
July 25, 2000 and the Sub-Decree on Insurance adopted * KHR4065.04 = US$1.00 as at January 1, 2016
on October 22, 2001, which remains in force. The new

Law on Insurance involves the following changes: a better 06 | Risk based capital
protection for policyholders, an increased control for the No – capital based.
regulatory body, dispute resolution and insurance companies’
liquidation and dissolution process, and a clearer regulation Insurance companies and intermediaries shall maintain a
for insurance companies to operate in Cambodia. deposit to the National Treasury.
Insurers, insurance brokers, insurance agents and loss Insurance Company: 10 per cent of registered capital
adjusters must be licensed by the regulator. Insurance Broker: US$50,000
Insurance Agent and Loss Adjustor: US$10,000
Only insurance companies licensed in Cambodia may
underwrite insurance business in Cambodia. Insurance companies shall maintain a solvency margin:
A reinsurer may operate from abroad without a licence. For the first year of operation: 50 per cent of the registered
capital; thereafter:
An insurance company shall be registered as a Public • KHR13.3 billion, where net premiums ≤ KHR66.5 billion
Limited Company. A foreign insurer may not carry on
business in Cambodia without establishing a locally • 20 per cent of total premium, where net premiums are
incorporated company meeting this requirement, i.e. a between KHR66.5 billion and KHR332.5 billion
branch of a foreign insurer is not permitted.
• KHR66.5 billion plus 10 per cent of insurance surplus
An insurance intermediary shall be registered as a Private from the previous year where net premium is < KHR332.5
Limited Company. billion,
03 | FDI restrictions in each case assessed on the previous year’s premiums.

Nil – local insurance companies may be owned 100 per cent
by foreign investors. Professional liability insurance: US$500,000 applicable only
to insurance brokers.
04 | Control approvals
A change of greater than 10 per cent of the shareholding 07 | Group supervision
of an insurance company must be notified to the insurance No.
regulator prior to the event. As the MEF may withdraw or not
renew a licence if the licence requirements are not met, it is
prudent to obtain prior approval to any change of control.
Management individuals are subject to agreement from the

MEF based on their diploma and experience.

Cambodia-
Apart from the solvency margin requirement and the
mandatory deposit, there is no protection fund for
policyholders (that is the purpose of the deposit).
On liquidation of a life insurance company there is no

priority for policyholders, however the policies and the
reserve fund shall be transferred to another life insurance
company. This provision has never been used, so no details
of its practical application are available.
However, the new Law on Insurance imposes a priority of

repayment of debt in case of liquidation of an insurance
company. The priority of repayment of debt is determined
as follows:
• remuneration and other expenses related to the

provisional governance and the liquidation
• claim for the insurance indemnity
• claim by the insurance policy holder
• salary of employee and worker, administrative fees, court

fees and other taxes of the court proceeding
• secured claim
• tax duty of the state without deposit of the notification
• recognised unsecured claim.
Yes. A Cambodian insurance company may apply to the
insurance regulator for approval to transfer all or part of
its insurance business to another Cambodian insurance
company. The transfer is effected by agreement between
the transferor and the transferee, once insurance regulator
approval is given. No portfolio transfer has been carried out.
It is prudent to assume the MEF will develop details of the
process that are in the best interests of the policyholders.
10 | Outsourcing
There is no restriction for outsourcing activities that are not
subject to licensing. Currently there are no loss adjustors or
actuaries registered in Cambodia so the MEF tolerates the
outsourcing of such activities to outside of Cambodia.

China
01 | The regulator Branches:

The China Insurance Regulatory Commission (CIRC) regulates RMB20 million for any single branch and RMB500 million
insurance companies and intermediaries, including agents, max for multiple branches.
brokers, loss adjustors and their business operations.
Insurer (non-life):
02 | Subsidiary/branch Nationwide:
Life and non-life insurer subsidiaries are permitted. RMB200 million for applying one of the following basic
Branches of non-life foreign insurers are permitted. Licences businesses: (i) motor insurance (including mandatory
are issued on a ‘province by province’ basis. and commercial), (ii) enterprise/household property
insurance and engineering insurance (excluding special
03 | FDI restrictions risk insurance), (iii) liability insurance, (iv) marine hull/
Yes. cargo insurance and (v) short term health/accident injury
insurance, and additional RMB200 million for adding one
• Non-life – 100 per cent by foreign investor more basic business above.
• Life – 50 per cent by foreign investor.
Branches:
An insurer branch or subsidiary with ≥ 25 per cent foreign RMB20 million for any single branch and RMB500 million
investment is ‘foreign funded’ and different administrative max for multiple branches
regulations apply to those that apply to locally funded
insurers. For example, a Representative Office is required to Carrying on extended life businesses (such as unit-linked
be in place for a two year ‘seasoning’ period before a foreign insurance and variable annuity insurance) or extended
funded insurer may be set up. non-life businesses (such as agricultural insurance, special
risk insurance, credit warranty insurance and investment
04 | Control approvals linked insurance) will subject insurers to higher qualification
≥ 5 per cent – prior approval of CIRC required. requirements such as having engaged in requisite basic
< 5 per cent – notification to CIRC after transfer. businesses, average net asset value requirement etc.
RMB 6.51 = US$1.00 as at January 1, 2016
Directors and controllers must be approved by CIRC as ‘fit

and proper’. 06 | Risk based capital
Yes.
Insurer (life): China formally launched a Solvency II type regime in May
Nationwide: 2013, which includes a three-pillar structure. One of the
RMB200 million for applying one of the following three three pillars is the requirement of capital quantification,
basic businesses: (i) life and annuity insurance, (ii) health which obliges an insurer to identify and quantify categories
insurance and (iii) accident injury insurance, and additional of risks (such as insurance risks, market risks, credit risks
RMB200 million for adding one more basic business above. etc) and support such risks with a comparable amount
of capital. Categories of risks are open to expansion, for
RMB1 billion for carrying on all three basic businesses example reputation risk has recently been added.
above, plus one category of the following two additional
basic businesses: (i) participating insurance and (ii) 07 | Group supervision
universal life insurance. Yes. A group requires two or more insurance companies
approved by CIRC and then constitutes all member
RMB1.5 billion for carrying all five basic businesses above. companies.

China-
Yes, funded by industry levies.
In the event of insolvency or revocation of licence of a non-

life insurer whose assets are insufficient to pay benefits, a
non-life policyholder protection fund covers 100 per cent of
losses up to RMB50,000 and thereafter, 90 per cent of losses
for individual policyholders and 80 per cent for corporate
policyholders.
In the event of insolvency or revocation of licence of a life

insurer, the policies are required to be transferred to a new
insurer and the policyholder protection fund will make up
the shortfall in supporting assets to 90 per cent of individual
policyholder liabilities and 80 per cent of corporate
policyholder liabilities.
Yes. Consent of CIRC and individual policyholders is required
for a voluntary portfolio transfer between contracting
insurers. If a policyholder objects or fails to consent, CIRC
cannot compel the transfer of a policy. In the event of a
merger, the surviving insurer is obliged to transfer any
portfolio that falls outside of its permitted business scope
to a qualified insurer upon CIRCs approval on the merger.
In this circumstance, the relevant laws are unclear on
whether the consent of individual policyholders is required
or not. In the event of insolvency or revocation of licence of
a life insurer, CIRC can compel a portfolio transfer without
policyholder consent.
10 | Outsourcing
There is no unified law on outsourcing applicable to
insurance operations. Individual laws address individual
areas. For example, there is an express prohibition on
outsourcing the management of the security of information
systems. Non-core back-office functions may be outsourced
to qualified outsource providers (e.g. call centres, customer
service and book-keeping).

Hong Kong
01 | The regulator 02 | Subsidiary/branch

The Insurance Authority (IA), head of the Office of the Both Hong Kong incorporated entities (including subsidiaries
Commissioner of Insurance (OCI) administers the Insurance of foreign insurers) and branches of foreign insurers are
Companies Ordinance which has provisions governing the permitted to conduct insurance business in or from Hong
regulation of insurers and insurance intermediaries (agents Kong if they satisfy the relevant requirements and are
and brokers) in Hong Kong. granted a licence by the IA.
An insurer must be authorised by the IA before it carries on A foreign insurer wishing to open a branch is required to
insurance business in or from Hong Kong. Insurance brokers satisfy the IA that it: (a) is a company incorporated in a
must be authorised by the IA or admitted as members of country where there is comprehensive company law and
self-regulatory organisations approved by the IA. At present, insurance law; (b) is an insurer under effective supervision
all insurance brokers in Hong Kong are members of either by the relevant authority(ies) of its home country; and (c) is a
one of the two approved broker bodies, namely, the Hong well-established insurer with international experience and of
Kong Confederation of Insurance Brokers (HKCIB) and the undoubted financial standing.
Professional Insurance Brokers Association (PIBA). The
Insurance Agents Registration Board (IARB) established 03 | FDI restrictions
under the Hong Kong Federation of Insurers is responsible None.
for registering insurance agents.
04 | Change of control approvals
The Insurance Companies (Amendment) Ordinance Prior approval of the IA must be obtained prior to any change
(Amendment Ordinance) was passed in July 2015 and will be to persons who are entitled to exercise or control the exercise
enacted and implemented on a phased basis in three stages. of more than 15 per cent (direct or indirect) shareholding or
This is to facilitate the transition from the existing IA and OCI voting power of an insurer.
and the self-regulatory regime for insurance intermediaries
to an independent Insurance Authority (IIA). The managing director, chief executive and shareholder
controllers (as described above) of the insurer must be
• Stage 1: Establish the Provisional Insurance Authority approved by the IA as ‘fit and proper’.
(PIA) (without regulatory functions and co-existing
with the OCI). This occurred in December 2015. It is An insurance broker must obtain the confirmation of the
intended that relevant guidelines for insurers and IA, or either the HKCIB or PIBA before confirming the
necessary subsidiary legislation will be ready before the appointment of its chief executive. An insurance agent must
commencement of Stage 2. obtain the confirmation of the IARB before confirming the
appointment of its responsible officer.
• Stage 2: PIA to become the IIA and to replace the OCI by
taking over its regulatory functions such as the prudential Changes to the existing requirements will be introduced by
and conduct regulation of insurers, frontline regulation of the Amendment Ordinance.
Mandatory Provident Fund intermediaries and enforcement
of the anti-money laundering regime. This is expected to 05 | Minimum capital
occur in approximately December 2016.The self-regulatory • HK$10 million – general and life insurers
insurance intermediary regime will continue.
• HK$20 million – composite insurers and insurers writing
• Stage 3: IIA to implement the statutory licensing regime statutory classes (e.g. third-party motor and, employee
and take over the regulation of insurance intermediaries compensation)
from the three existing self-regulatory (broker and agent)
organisations. This is expected to occur in approximately • HK$2 million – captive insurers.
December 2018–2019.

Hong Kong-
Branches of overseas insurers have no capital deposit Key elements of the proposed regime will cover the nature
requirement, but must maintain assets in Hong Kong equal to of groups to be subject to group-wide supervision, as
80 per cent of net liabilities and the applicable solvency margin. well as prudential, corporate governance, enterprise risk
HK$7.75 = US$1.00 as at January 1, 2016 management and disclosure requirements at the group level.
06 | Risk based capital 08 | Policyholder protection

No, the current framework is a rules-based capital adequacy There is currently no compensation scheme for life
framework. However, an insurer must maintain an excess insurance policies and certain types of general insurance
of assets over liabilities of not less than a required solvency policies. However, there are two funds to protect the
margin: interests of policyholders or claimants of certain statutory
general business in the event of insurer insolvency: (a) the
General – the greater of: Insolvency Fund operated by the Motor Insurers’ Bureau of
Hong Kong is available for meeting claims for bodily injuries
• 20 per cent of relevant premium income up to HK$200 or death arising from motor accidents; and (b) the Employees
million plus 10 per cent of the amount by which the Compensation Insurer Insolvency Scheme operated by the
relevant premium income exceeds HK$200 million Employees Compensation Insurer Insolvency Bureau is
available to meet employees’ compensation claims.
• 20 per cent of relevant outstanding claims up to HK$200
million plus 10 per cent of the amount by which the The consultation process for the establishment of a
relevant outstanding claims exceed HK$200 million, policyholder protection fund (PPF) for direct general
(other than motor vehicle and employees’ compensation
subject to a minimum of HK$10 million (HK$20 million for claims which are covered by the existing schemes) and
certain statutory classes). life insurance policies concluded in January 2012 and the
drafting of legislation is underway. It is proposed that there
Life – the greater of: will be separate life and general policyholder protection
schemes, which will be established on a statutory basis
• HK$2 million and administered by a statutory body under independent
oversight of the PPF Board. Subject to completion of the
• generally 4 per cent of mathematical reserves plus 0.3 per legislative process, the PPF is expected to be set up following
cent of capital at risk. establishment of the new IIA.
There are proposals to introduce a risk-based capital Policyholders have priority in the distribution of an insurer’s
framework. The IA published consultation conclusions in assets in the event of its insolvency.
September 2015 on the proposed introduction of a risk-
based capital framework in line with core principles of the 09 | Portfolio transfers
International Association of Insurance Supervisors (IAIS). It Yes. All or part of portfolios of life business must be
is proposed that the framework will comprise three pillars transferred under a court-sanctioned scheme of transfer. The
(Pillar 1: quantitative requirements; Pillar 2: qualitative transferor or transferee insurer may apply to court to approve
requirements; and Pillar 3: disclosure and transparency a scheme for the transfer, which also involves engagement
requirements) and will be introduced on a phased basis; the with the IA. The IA, policyholders and interested parties may
next step being the development of detailed rules. object to the proposed transfer but the court ultimately has
discretion to approve the scheme.
07 | Group supervision
Not currently. However, there are proposals to introduce General business portfolios may be transferred contractually
group supervision. The IA has expressed an interest in being or alternatively under the statutory provisions with approval
part of a transitional regime for third country equivalence of the IA upon application of the transferor. Policyholders
under Solvency II, which requires group supervision. The and other interested parties may object to the transfer, but
proposals have regard to the core principles of the IAIS and the IA has ultimate discretion to approve the scheme.
similar group-wide supervision regimes introduced and
proposed in other jurisdictions, including the EEA. Notification by Gazette/newspaper advertisement is required
as a minimum.

10 | Outsourcing
Outsourcing by insurers is generally permitted, subject
to compliance with IA guidance (GN14) which applies
to all outsourcing arrangements of authorised insurers
incorporated or based in Hong Kong and for the Hong Kong
operations of overseas insurers. An authorised insurer
must notify the IA at least 3three months before entering
into, or significantly varying, any material outsourcing
arrangement. Essential issues to consider when outsourcing
(regardless of materiality) include having a documented,
board-approved outsourcing policy in place, conducting a
risk and materiality assessment and entering into a written
agreement with the service provider. The IA must be satisfied
that all essential issues have been properly addressed.
Within 30 days of entering into a material outsourcing
arrangement, further details must be submitted to the IA
together with a copy of the outsourcing agreement.

India-
India
Contributed by: Cyril Amarchand Mangaldas

The Insurance Regulatory and Development Authority Minimum paid-up capital requirements:
(IRDA) which is constituted under the Insurance Regulatory
and Development Authority Act 1999, and which derives its • insurer – INR1 billion
powers from the Insurance Act 1938 regulates entities which • reinsurer – INR2 billion
carry on insurance business and intermediary business • direct broker – INR5 million
(brokers, insurance surveyors, loss assessors, insurance • reinsurance broker – INR20 million
agents and third party administrators) in or from India. • composite broker – INR25 million.
02 | Subsidiary/branch Equity shares having a single face value and other forms
Performance of any commercial activity in the insurance of capital as may be specified by regulations are allowed.
sector requires the establishment of a duly licensed local However, voting rights of shareholders are restricted
entity. A local insurer must be a public company or a to equity shares only. A foreign company carrying on
co- operative society. A foreign company is permitted to reinsurance business through a branch in India is required to
undertake reinsurance business in India by establishing a have net owned funds of INR 50 billion.
branch in India. INR$66.24 = US$1.00 as at January 1, 2016
03 | FDI restrictions 06 | Risk based capital

Foreign direct investment to the extent of 49 per cent of Every insurer and re-insurer shall at all times maintain an
equity share capital of an Indian insurance company and excess of value of assets over liabilities of not less than 50
insurance sector intermediaries is permitted under extant per cent of the amount of minimum capital that such insurer
Indian laws. or re-insurer is required to bring.
Foreign direct investments up to 26 per cent of the total Available Solvency Margin (ASM) is in excess of policyholder
paid up equity of the Indian insurance company is allowed funds and shareholder funds.
under the automatic route, i.e. without prior approval of the
Foreign Investment Promotion Board (FIPB). Foreign direct Solvency Margin Ratio (ASM/RSM) must be not less than 1.5.
investment between 26 per cent and 49 per cent is permitted
with prior approval of the FIPB. 07 | Group supervision
No.
All insurance companies in India with foreign investment are
required to be mandatorily Indian ‘owned and controlled’. 08 | Policyholder protection
The IRDA (Protection of Policyholders’ Interests) Regulations,
04 | Control approvals 2002 provides for protection of the interest of the policyholders.
Any transfer of shares by a transferor or group of transferors
which jointly or severally exceeds 1 per cent of the paid The Corporate Governance Guidelines for Insurance
up equity capital of an insurance company requires prior Companies require each company to form a Policyholder
approval of the IRDA. Protection Committee. The committee is responsible for
addressing the various compliance issues relating to
Prior approval of the IRDA is also required for any transfer protection of the interests of policyholders and keeping
where the shareholding of the transferee is likely to exceed the policyholders well informed of and educated about
5 per cent of the paid up equity capital of the insurance insurance products and complaint-handling procedures.
company.
The committee will directly report to the board of directors of
All other changes in shareholding must be notified to IRDA. the insurance companies.
In case of a private bank promoted insurance company (an
insurance company owned by a bank) any foreign direct
investment in the bank requires approval of the Reserve
Bank of India in consultation with the IRDA.

Yes. A scheme for amalgamation must be submitted to
and approved in principle by IRDA then advertised to
policyholders, following which IRDA will give final approval
if the merger is in the best interests of the policyholders.
10 | Outsourcing
Core and important activities which are said to affect
corporate governance, protection of policyholders, solvency
and revenue flows of the insurer cannot be outsourced. There
is a comprehensive list of core activities in the Guidelines
on Outsourcing of Activities by Insurance Companies,
including: underwriting, product design, actuarial functions,
ERM, investment and related functions, fund accounting,
claims decisions, bank reconciliation, complaints, market
conduct, appointment of surveyors and loss assessors and
compliance.

Indonesia-
Indonesia
Contributed by: Makarim & Taira S.
01 | The regulator 06 | Risk based capital

The Financial Services Authority (Otoritas Jasa Keuangan RBC Solvency Margin Ratio = net asset value (book value)/
‘OJK’) supervises all financial institutions. Law No. 40 of net asset value recalculated with possible adverse risks taken
2014 on Insurance which was enacted on October 17, 2014 into account (risk based capital). Specific risk factors are
is the principal legislation relating to insurance business applied to asset values to reflect the potential for an asset
(Insurance Law). default, currency mismatch of assets and liabilities, adverse
claim experience and reinsurance default.
Branches of foreign insurers are not permitted. Only an 07 | Group supervision
Indonesian incorporated legal entity can apply for a licence No.
to engage in business as an insurer.
03 | FDI restrictions Each insurance company must form its own protection
Yes. Foreign insurance company (or, as the case may be, any fund to serve as a ‘last resort’ to protect the interests of its
of its shareholders) engaged in similar insurance activities policyholders. The protection fund must constitute at least
to those of the proposed company in Indonesia may hold 20 per cent of the insurer’s own capital, which must be
up to 80 per cent of its shares at establishment subject to an adjusted to the development of the insurance company’s
implementing Government Regulation to be issued soon. business volume. The funds representing the protection fund
must be deposited with a bank. Within three years of the
04 | Control approvals enactment of the Insurance Law, the protection fund will be
Any transfer of shares in an insurance company requires replaced by a policy assurance program, which all insurance
approval from the OJK. companies licensed by the OJK must be a member. Once the
policy assurance program comes into effect, the protection
All key parties must pass the OJK’s ‘fit and proper’ test before fund requirement will no longer apply to insurance
being appointed or acquiring shares. Key parties means companies.
members of the Board of Directors, Board of Commissioners,
Sharia Supervisory Board and the Members Representative All insurance companies must also be a member of a
Board, as well as controlling shareholders, experts and foreign mediation institution for resolving disputes between
citizens. A controlling shareholder is a shareholder that holds insurance companies and their policyholders.
25 per cent or more interest in the company, or less than 25
per cent but can influence the management and/or policy of The Insurance Law gives policyholders preferential rights
the insurer. An insurance company must have at least one in liquidation ahead of secured and unsecured creditors,
controlling shareholder determined by the general meeting of but behind preferred creditors (as well as tax liabilities and
shareholders, who will require approval for ceasing to be a employee compensation).
controller from the OJK. A party (other than the Indonesian
Government) may only be a controlling shareholder in one life OJK Regulation No. 1 of 2013 gives a policyholder the right
insurance company, general insurance company, reinsurance to report a complaint to the OJK over a dispute between an
company, sharia life insurance company, sharia general insurance company and the policyholder and/or an alleged
insurance company or sharia reinsurance company. violation of the financial laws and regulations. Insurance
Controlling shareholders have three years to comply with this companies must implement an annual customer and/or
requirement under the Insurance Law. public education program to promote financial (insurance)
literacy.
Insurer: IDR 100 billion 09 | Portfolio transfers
Sharia insurer: IDR billion The consent of the OJK is required. If the transfer involves
Reinsurer: IDR 200 billion all portfolios, the shareholders of the transferor must
Sharia reinsurer: IDR billion submit an application to OJK for the return of its insurance
IDR$13,837 = US$1.00 as at January 1, 2016 business license after the transfer has been completed. The

policyholders must be informed of the transfer in writing.

Announcements in national circulated newspapers must
also be made by the transferor. A report to the OJK on the
result of the transfer must be submitted by the transferor
upon completion of the transfer. However, the applicable
regulation is silent on the procedure to be followed by
customers who object to the transfer.
10 | Outsourcing
While the Insurance Law allows an insurance company
to outsource some of its functions, it is still silent on what
functions may be outsourced and the relevant requirements.
This will presumably be further regulated under its
implementing regulations.

Japan-
Japan
Contributed by: Nishimura & Asahi
01 | The regulator • acquire 20 per cent or more (or 15 per cent or more
Under the Insurance Business Act (IBA) the Prime Minister of together with substantial influence on financial and
Japan has overarching authority as the insurance regulator. business policy decisions) of the voting rights of a
Except for certain important powers such as granting and Licensed Insurance Company (Major Shareholder
cancelling insurance business licences, most have been Threshold) – the ultimate controller as well as the direct
delegated to the Commissioner of the Financial Services controllers must apply.
Agency of the Japanese Government (FSA) and to the
directors of the Local Finance Bureau and the Local Finance The acquisition of five per cent or more of the voting rights in
Branch Bureau of the Ministry of Finance (collectively LFB). an insurer must be notified.
Insurers and reinsurers must be licensed by the Prime 05 | Minimum capital

Minister. There is a separate category of registration for Licensed Insurance Companies ¥1 billion x capital
entities that only carry on small amount and short-term
SASTI insurers ¥10 million x capital plus
insurance business (SASTI).
¥10 million x (or more) deposit
Insurance brokers (Nakadachi-nin) must be registered. Licensed Foreign Insurers ¥200 million x deposit
Insurance brokers ¥20 million x (or more)
Insurance agents must be registered and, for life insurance,
deposited guarantee
every officer and employee of a corporate agent who
¥120.63 = US$1.00 as at January 1, 2016
individually acts as an agent must also be registered.
02 | Subsidiary/branch 06 | Risk based capital

Japanese incorporated entities with a licence are Licensed The IBA provides for calculation of a solvency margin ratio:
Insurance Companies.
Total amount of
Branches of foreign insurers and reinsurers may also be solvency margin
Solvency margin x 100
licensed and are known as Licensed Foreign Insurers. Every
ratio (%) =
Licensed Foreign Insurer must deposit ¥200 million with the Total amounts of
government office. risk x ½
Except in limited circumstances only Licensed Insurance The total amount of risks is calculated using different
Companies or Licensed Foreign Insurers may underwrite formulas for life and non-life, taking into account potential
policies covering Japanese risks. volatility or deviations in claims, interest rates, asset
valuations, credit risk, business risks, minimum guarantee
03 | FDI restrictions risk and catastrophe risks.
None.
A solvency margin of:
Prior authorisation (ninka) from the FSA is required to: 200% or more = sound condition, no intervention by FSA
• become an ‘insurance holding company’ (a company (i) Less than 200% and no less than 100% FSA will issue a
of which more than 50 per cent of the total assets consists ‘business improvement order’
of subsidiaries’ shares and (ii) which holds the majority of
voting rights in a Licensed Insurance Company). Less than 100% and no less than 0% FSA will order
measures to improve capability to pay claims, e.g.
suspension of dividends to shareholders and/or
policyholders, change of terms for new business,
prohibition on directors’ bonuses.

Less than 0% FSA will order partial or total suspension 10 | Outsourcing

of business Insurers may only in very limited circumstances (usually
limited to insolvency) delegate discretionary powers with
07 | Group supervision respect to their substantial business or administration of
From the fiscal year ending March 2012 a group solvency their assets with the FSA’s prior approval. Insurers may
margin requirement applies to the group (the holding outsource ‘clerical functions’ to a service provider without
company and its subsidiaries or the insurance company and restriction. If the service provider is another insurer, the
its subsidiaries). service provider must obtain the FSA’s prior approval.
With regard to insurance solicitation, the IBA has been
08 | Policyholder protection amended to require that not only insurance providers, but
There are two policyholder protection corporations: Life also insurance agents take measures to ensure the sound
Insurance Policyholders Protection Corporation of Japan and and appropriate management of their insurance solicitation
the Non-Life Insurance Policyholders Protection Corporation business. The IBA amendments in 2014 establish new
of Japan. There is no such corporation covering SASTI. fundamental rules regarding insurance solicitation under
which persons conducting insurance solicitation should
They will protect the policy reserves depending on the type perform certain acts in order to ensure that they give finely-
of insurance. Basically, up to 90 per cent (life insurance) or tuned responses to their customers at each step of the
80 per cent (non-life insurance) of the policy reserves will be insurance solicitation. The new rules will be in force from 27
protected. May 2016.
In addition, they may:
• provide financial assistance for the transfer or payment

of insurance contracts of a bankrupt insurer
• assume insurance contacts of a bankrupt insurer
• purchase rights to insurance claims of a bankrupt insurer.
The corporations are funded by industry levies.
Permitted as a portfolio transfer. Insurance contracts can
be transferred to another insurance company subject to
certain conditions and procedures including public notice,
the absence of more than one-tenth (or one-fifth in the case
of transfer of all insurance contracts) of the policyholders
objecting and prior authorisation from the FSA. The IBA
no longer requires that such portfolio transfer cover all
insurance contracts, which adopt the same calculation basis
for their policy reserves.

Macau-
Macau
Contributed by: MdME

Macau is officially known as the Special Administrative Minimum paid-up capital requirement:
Region of the People’s Republic of China (‘Macau SAR’). The
Macau SAR insurance regulator is the Monetary Authority • Insurance companies (life) MOP30 million
of Macau, known by its Portuguese acronym ‘AMCM’, which • Insurance companies (non-life) MOP15 million
operates under the authority of Macau SAR’s Chief Executive. • Reinsurance companies (life) MOP150 million
The Insurance Supervision Department is AMCM’s dedicated • Reinsurance companies (non-life) MOP100 million.
insurance unit.
50 per cent to be paid in at the time of application, the
Insurers and Reinsurers must be licensed and will be either remaining to be paid in within 180 days from the date of
life or non-life. Composite licences are not granted. incorporation of the company;
A company carrying on business as an insurance broker or • Insurance broker companies MOP25,000

insurance agent must be approved by AMCM and at least one • Insurance agent companies MOP25,000.
individual must be appropriately qualified.
In order to be permitted to establish a branch, a foreign
02 | Subsidiary/branch insurer/reinsurer must have a paid up capital at least equal
Both Macau incorporated entities (including subsidiaries to the minimum capital requirement of a Macau incorporated
of foreign insurers) and branches of foreign insurers are insurance/reinsurance company and allocate to the
permitted. branch funds in the amount of MOP7.5 million (life) and
MOP5million (non-life).
A foreign insurer must be licensed and have been in MOP$7.98 = US$1.00 as at January 1, 2016
operation for more than five years in its country or territory

of origin, must have sound business and financial ability and 06 | Risk based capital
have no record of material violation of laws and regulations Non-life insurance companies must maintain a solvency
in order to be permitted to establish a branch. ratio determined in accordance with the total amount of
gross written premiums of the previous year, as follows:
A foreign insurer will only be permitted to carry on in Macau,
through its authorised branch, the class of insurance for Gross written premiums Solvency ratio
which it is licensed and which it effectively operates in its
< MOP 10 million MOP5 million
jurisdiction.
= or > MOP 10 million and 50 per cent of the gross
< MOP 20 million premium amount
03 | FDI restrictions
Nil. = or > MOP 20 million MOP 10 million plus 25 of the
amount in excess of MOP20
04 | Control approvals million of gross premiums.
Prior approval from AMCM is required to directly or indirectly
acquire more than 10 per cent of the share capital or of the Life insurance companies must maintain a solvency ratio
voting rights in a Macau incorporated insurance company. determined by a set of formulas that take into account the
Any subsequent and cumulative increase of more than 5 mathematical reserves of the main technical provisions and
per cent must similarly be approved by AMCM. Voting rights the risk based capital.
held by nominees and related parties are aggregated for the
purpose of assessing whether the limits have been reached. As insurance company solvency ratio must be composed by
tangible unencumbered assets. AMCM publishes a yearly list
of assets which are excluded from incorporating the solvency
ratio of authorised insurers.

No.
No, except in respect of the mandatory motor vehicle
insurance policyholders. The Automobile and Recreational
Boats Guarantee Fund (FGAM) is a public organisation,
sponsored by insurance companies, established to safeguard
the interests of insured parties and beneficiaries of the
mandatory motor vehicle and recreational boats insurances.
The Automobile Guarantee Fund may advance claims
payments to beneficiaries in case an insurance company is
declared bankrupted or in case the responsible party does
not hold a valid policy at the time damage is caused.
Yes. An insurance company and/or a branch of a foreign
insurer may apply to AMCM for approval to transfer all or
part of its insurance business to another Macau insurer or
Macau branch of a foreign insurer. In practice, prior notice
is often given to policyholders to give them the opportunity
to object. The transfer of life insurance policies will not be
authorised if 20 per cent or more of the policyholders object
to such transfer.
10 | Outsourcing
The outsourcing of business operations by an insurer is
currently not expressly regulated. The existing regulatory
practice is that AMCM reviews outsourcing requests on a
case-by-case basis. The insurer is required to provide details
on the types of activities to be outsourced, the party to whom
the activities shall be outsourced, the control measures in
place and the contingency plans and monitoring procedures
to be set out. Guidelines to this respect are expected to be
published by AMCM in the short term.

Malaysia-
Malaysia
Contributed by: Zaid Ibrahim & Co
01 | The regulator In addition, a company holding > 50 per cent interest in

Bank Negara Malaysia (BNM) regulates entities which carry shares in a licensed insurer must be approved by BNM as a
on insurance business, insurance broking, adjusting and ‘financial holding company’.
financial advisory. Insurers are licensed by the Minister of
Finance on the recommendation of the BNM. Brokers and For an approved insurance broker or financial adviser, ≥ 5
financial advisers must be approved by BNM, and adjusters per cent shareholding requires notification to BNM and any
must be registered with BNM. change of control requires prior written approval of BNM.
02 | Subsidiary/branch 05 | Minimum capital

Branches are not permitted. Insurers (other than professional Minimum paid-up share capital:
reinsurers) must be public companies; adjusters must
be incorporated, whereas BNM may specify the form of • insurer: RM100 million
establishment of reinsurers, brokers and financial advisors. • local reinsurer (life): RM50 million
• local reinsurer (non-life): RM100 million.
There is currently a freeze on the issuance of new insurance
licences by BNM, although BNM may be open to consider Minimum surplus assets over liabilities:
applications on a case by case basis. Prior consultation with
BNM is encouraged. • licensed foreign reinsurer: RM20 million
RM$4.30 = US$1.00 at January 1, 2016
Yes: 70 per cent limit on foreign equity ownership. 06 | Risk based capital
Yes, the Risk-Based Capital Framework applies to all insurers,
> 70 per cent considered on a case by case basis for players including reinsurers, licensed under the Financial Services
who can facilitate consolidation and rationalisation of the Act 2013, for business generated within and (subject to
industry. limited exceptions) outside Malaysia. The Framework was
implemented with effect from January 1, 2009.
Prior written approval of the BNM or the Minister of Finance CAR = Total Capital Available X 100 per cent.
(as the case may be) is required for a person to: Total Capital required
• initially acquire an aggregate share interest of >5 per cent Total capital available (TCA) is the aggregate of Tier 1 capital
in a licensed insurer (such as issued and paid-up ordinary shares) and Tier 2
capital (such as cumulative irredeemable preference shares)
• subsequently hold an aggregate share interest in a less deductions from capital (such as goodwill, deferred tax
licensed insurer equal to or exceeding each multiple of 5 assets and investment in subsidiaries). The total amount of
per cent, or the trigger for a mandatory general offer (i.e. Tier 2 capital must not exceed the amount of Tier 1 capital.
33 per cent)
Total capital required (TCR) is the aggregate of capital
• hold more than 50 per cent interest in share in a licensed charges for each insurance fund and assets in the
insurer shareholders fund/working fund. Capital charges are fixed
for credit risk, market risk, insurance liability risk and
• have ‘control’ over a licensed insurer, regardless of operational risk or surrender value capital charges.
shareholding level; or
BNM has set a Supervisory Target Capital Level of 130 per cent.
• dispose of shares resulting in shareholding below 50 per
cent or a change in ‘control’.

Each insurer must set its own Individual Target Capital Level An insurer is required to notify BNM of any material
to reflect its own risk profile. The Individual Target Capital outsourcing arrangement.
Level must be higher than the Supervisory Target Capital
Level. Note: The Financial Services Act 2013 provides that any
guideline, direction or circular which was issued before
07 | Group supervision the enforcement of the Financial Services Act 2013 under
Yes. Under the Financial Services Act 2013, BNM is the repealed Insurance Act 1996, in relation to any matter
empowered to exercise oversight over financial groups for which corresponds with any provision of the Financial
the purposes of promoting the safety and soundness of a Services Act 2013, shall be deemed to be standards and shall
licensed insurer. In general, the prudential requirements remain in full force and effect in relation to the person to
applicable to licensed insurers also apply to financial whom it applied until amended or revoke. At this juncture,
holding companies, and BNM may specify standards on as there has not been any announcement made in relation
prudential matters to a subsidiary of a financial holding to any amendment and/or revocation of the relevant BNM
company if it is of the opinion that the activities of such guidelines, the above outsourcing requirements would still
subsidiary may pose risks to the licensed insurer or its apply to all insurers.
financial group. BNM also has the power to issue directions
to a financial holding company, its subsidiary or the director,
CEO or senior officer of such financial holding company or
such subsidiary.
The Malaysia Deposit Insurance Corporation (MDIC)
administers the Takaful and Insurance Benefits Protection
System (TIPS) which protects specific benefits under life
and general insurance, subject to specific limits for different
classes of coverage.
Yes, by scheme approved by the BNM and confirmed by
the Court. Court approval has the effect of vesting all of
transferor’s right and title in the assets transferred by the
scheme on the transferee and making the transferee fully
responsible for the liabilities transferred by the scheme
without further actions or consents required.
10 | Outsourcing
‘Core Activities’ consist of activities constituting insurance
business (i.e. receiving proposals for insurance, negotiating
on proposals for insurance on behalf of an insurer, issuing
of policies, collection or receipt of premiums or settlement
or recovery of claims on policies), board and senior
management oversight, investment management, internal
audit and compliance functions, risk management, strategic
planning and decision making and financial analysis.
Certain types of core activities are permitted to be

outsourced except to the extent permitted and subject to
the requirements set out in the relevant BNM guidelines.
The prior approval of BNM is required for the outsourcing
of some of these core activities (e.g. premium collection,
administration of claims, investment management to fund
managers and internal audit to group internal audit).

Mongolia-
Mongolia
Contributed by: ELC LLP Advocates
01 | The regulator communication sector, it shall obtain approval from the state
The Financial Regulatory Commission (FRC) is the regulatory central administrative body in charge of investment affairs.
and supervisory body of the insurance market in Mongolia.
The FRC implements and enforces the insurance legislation, The basic requirement is where more than 25 per cent of
including the Law of Mongolia on Insurance (2004) and the the total issued shares of a Mongolian entity are owned by
Law on Insurance Intermediaries (2004). a foreign investor, at least US$100,000 must be invested by
each foreign investor.
Insurers, insurance brokers, insurance agents, intermediaries
and loss adjusters must be licensed by the FRC. 04 | Control approvals
Prior written approval from the FRC is required for any
No person may advertise or promote any insurance business person to acquire 10 per cent or more of the ordinary shares
or establish a place of business for that purpose or establish of an insurer.
or maintain a representative office or branch without the
prior written approval of the FRC. Any persons applying to hold 10 per cent or more of the
ordinary shares in an insurer, and their controllers (being
02 | Subsidiary/branch persons holding 10 per cent or more of the applicant)
A licence is required to carry on insurance business in or must be approved by the FRC as fit and proper to carry out
from Mongolia or conduct insurance intermediary activities insurance business.
in Mongolia. Either a company established in Mongolia or in
another jurisdiction may apply for a licence. Persons owning or holding 10 per cent or more of the
ordinary shares of an insurer solely or collectively shall not
When a foreign legal entity is carrying out reinsurance based transfer, sell or pledge such shares without the prior written
on insurance agreement made with an insurer, no license approval of the FRC.
from the FRC is required.
Foreign insurers and insurance intermediaries established The capital of an insurance company may consist only of
outside Mongolia may open a representative office or a share capital and may not be accumulated through loans.
branch in Mongolia with the prior written approval of the
FRC. Minimum capital requirement:
There is a prohibition on cross holdings between insurance • General insurance: MNT5 billion
brokers and insurance agents and insurers and insurance • Long term insurance: MNT6 billion
brokers and their directors. • Reinsurance: MNT15 billion.
MNT$1994.02 = US$1.00 as at January 1, 2016
Investment including foreign investment in Mongolia is 06 | Risk based capital
regulated primarily through the Law on Investment which No. The Solvency Requirement (SR) is determined as below,
was enacted on October 3, 2013. One aim of this law is subject to the FRC’s discretion.
to support and encourage investors and to attract more
investment into Mongolia. Ordinary Insurers
The main objective is to protect the legal rights and interests Proper Ratio of Solvency = (admitted assets – debts &
of investors in Mongolia without any distinction as a foreign payments )/(mandatory assets)*100
investor or as a domestic investor and to stabilise the tax
environment by issuing ‘Stabilisation Certificate’. If the Proper Ratio of Solvency is < 100 per cent the insurer
will be considered insolvent.
Where a foreign state owned entity proposes to hold 33
per cent or more of the total issued shares of a Mongolian
legal entity operating in the banking, finance, media and

Long Term Insurers
Proper Ratio of Solvency = (admitted assets )/(debts and

payments)*100
The Proper Ratio of Solvency shall be ≥ 125 per cent
If the ratio is between 125 per cent – 100 per cent, the
insurer will be presumed to become insolvent.
If the ratio is less than 100 per cent the insurer will be
considered insolvent, Solvency Margin = admitted assets –
debts and payments
Solvency Margin = admitted assets – debts & payments
The Solvency Margin shall be ≥ the Minimum Solvency

Requirement (MSR).
The MSR = actuarial percentage of the reserve fund +

valuation percentage of risk of insurance policies.
Where an insurer is a member of a group of companies,
the FRC may require it to submit financial statements for
any other members of the group and consolidated group
accounts.
Each insurer holding a license to carry out compulsory

insurance activity is obliged to join Union of Compulsory
Insurers (the ‘Union’). The Union shall submit annual
activity report and FRC shall publish brief financial
statement of the Union to public press.
There are statutory funds designed to protect policyholders.
These are the long term fund, the insurance reserve fund and
the reinsurer’s protection fund.
Transfer or amalgamation of an insurer’s business may only
take place with the prior written consent of the FRC. The FRC
may investigate the desirability of the transfer and require
the provision of documents and information from the insurer
before granting permission.
10 | Outsourcing
No activities constituting insurance activities may be
outsourced except to an entity that has the appropriate
authorisation to perform those activities. Outsourcing to an
entity outside of Mongolia is only permitted with the prior
written consent of the FRC.

Myanmar-
Myanmar
Contributed by: DFDL

The Insurance Business Supervisory Board, which reports Minimum paid up capital:
to the Ministry of Finance and Revenue, is responsible
for licensing insurers, underwriting agents and insurance • life insurance: MMK6 billion
brokers. Myanmar Insurance, the state owned insurance • non-life insurance: MMK40 billion
company, performs the work of the Supervisory Board. • mixed: MMK46 billion.
02 | Subsidiary/branch 10 per cent of the paid up capital must be deposited at the

Insurance and insurance broking business must be Myanmar Economic Bank.
conducted through either a company incorporated in
Myanmar or a company established outside Myanmar with 30 per cent of the paid up capital must be used to purchase
an established place of business in Myanmar. Government Treasury Bonds.
MMK$1306.73 = US$1.00 as at January 1, 2016
Until 2013, Myanmar Insurance was the sole insurer in

Myanmar. 06 | Risk based capital
No – capital requirements are based on a solvency margin.
In September 2012 the government announced that it would
grant 12 new licences to domestic operators (writing a A separate fund for each class of general business and for life
more limited range of classes than the incumbent Myanmar assurance must be established.
Insurance). These licenses have since been granted. Foreign
companies are meeting and providing services to these 07 | Group supervision
companies with the hope of future collaboration. One No.
problem is that the majority of the companies that have
received these licenses are on the US specially designated 08 | Policyholder protection
nationals list and this fact may prevent some foreign The Supervisory Board has the power to establish a fund for
companies from dealing with them. the protection of life assurance policy-holders.
A second round of licences is anticipated but has not been Policyholders get priority over an insurer’s assets in the
announced. event of insolvency (subject to certain preferential payments
– section 230 Myanmar Companies Act).
Foreign investment in the insurance industry is not 09 | Portfolio transfers
permitted. This may be relaxed in the future, as a result of The insurance laws are silent as to portfolio transfers.
Asean Economic Community. At present, foreign insurers
are limited to opening representative offices in Myanmar 10 | Outsourcing
– registered offices of foreign companies not allowed to The insurance laws are silent as to outsourcing.
conducting business, except of a general liaison nature,
e.g. to establish contacts in Myanmar.
An insurer may not transfer its licence and shall provide
information about its shareholders when required by the
Supervisory Board.

New Zealand
Contributed by: Kensington Swan

The Reserve Bank of New Zealand (RBNZ), which gains its Actual Solvency Capital (ASC)/ Fixed Capital Amount:
authority under the Insurance (Prudential Supervision)
Act 2010, is the regulator of the insurance sector. Any • Life insurer – ASC of NZD5 million
entity that is formed or is resident or carries on business
in New Zealand, and assumes liabilities to New Zealand • General insurer – ASC of NZD3 million ($1 million for
policyholders as an insurer under a contract of insurance, captives)
requires a licence from and is regulated by the RBNZ.
06 | Risk based capital
The provision of insurance broking services and other Solvency Margin is the excess of Actual Solvency Capital
insurance intermediation services (such as the provision (ASC) over Minimum Solvency Capital (MSC), expressed as a
of advice in relation to insurance products) is regulated. dollar amount.
Licensing authorisation is currently not required under
New Zealand legislation in order to provide these services, ASC is the total of capital less deductions from capital.
although entities with a place of business in New Zealand
are usually required to be registered before carrying on a MSC = Total Solvency Requirement (TSR) less, in the case of
business of providing or offering to provide such a service. life insurance, the aggregate of Policy Liabilities and Other
Liabilities.
Insurers: TSR = sum of capital charges for certain key business metrics
including: insurance risk, catastrophe and asset risks
• an insurer may be a local entity or a branch of a foreign (including credit, equity & property risk, foreign currency &
insurer interest rate risk, asset concentration risk and reinsurance
recovery risk).
• the directors and other relevant officers must be ‘fit and
proper’ Policy Liabilities are valued on a best estimate basis and
Other Liabilities are valued under NZ GAAP.
• an insurer must hold a current financial strength rating
from an approved rating agency. Any likely breach over the next three years must be reported.
Brokers, financial advisers and insurance agents – may 07 | Group supervision

be a local entity, branch of a foreign broker or insurer, or Yes – for subsidiaries of NZ insurers. Insurer subsidiaries
individuals. must be consolidated and the solvency standards applied
to the consolidated group. Non-insurance subsidiaries are
03 | FDI restrictions treated as related party equity investments, subordinated
Yes – consent of the Minister of the Crown is required for loans or other obligations.
acquisition of rights or interests of 25 per cent or more of an
entity worth more than NZ$100 million. 08 | Policyholder protection
NZ$1.46 = US$1.00 as at January 1, 2016 Life Insurers must maintain and keep distinct and separate
from other assets, one or more statutory funds into which all
04 | Control approvals amounts received by the insurer in respect of the business of
Consent of the RBNZ must be obtained for any change of that fund must be credited. Investments made are assets of
control of a licensed insurer: control means ≥ 50 per cent of the fund.
the company’s voting rights.
There is no legislative requirement to maintain a protection
fund for non-life policyholders.

New Zealand-
Overseas insurers are required to disclose the nature and

extent of any overseas policyholder preferences in relation
to recognition and priorities of claims in the event of the
insurer’s insolvency.
Any provision in a licensed insurer’s constitution that

permits a director of the insurer to act in a manner believed
to be in the interests of the insurer’s holding entity, even
though it may not be in the interests of the insurer, is of no
effect.
On liquidation of an insurer, (other than from a life insurer’s

statutory fund) there is no priority for policyholders and
the Court has the power to reduce the value of contracts of
insurance.
Yes. The RBNZ may on application approve a transfer of all or
part of an insurer’s NZ business to another insurer that meets
the licensing requirements. The RBNZ must have regard to
the policyholders’ interests and may request an actuarial
report. The transfer takes effect as a novation of each policy.
On insolvency, a liquidator or administrator may apply to the

High Court for approval of a scheme of transfer of insurance
business.
10 | Outsourcing
There is no express restriction on outsourcing. However
insurers must have a risk management policy and depending
on the nature and scope of the activity to be outsourced,
such outsourcing may need to be disclosed by way of a
modification to the risk management policy. In addition, the
insurer must ensure that at all times it meets the conditions
for entitlement to hold its licence.

Papua New Guinea

Contributed by: Leahy Lewin Lowing Sullivan Lawyers
01 | The regulator 04 | Control approvals

The two regulators of the insurance industry in Papua New Section 36 of the Insurance Act provides that all risks
Guinea are the Insurance Commissioner and the Bank of situated in PNG are to be insured with PNG licensed insurers.
Papua New Guinea. The Insurance Commissioner has a discretion to grant an
exemption from this requirement. These restrictions apply to
The regulator for general insurance business is the Insurance reinsurance as well and practical issues can arise due to the
Commissioner who administers the Insurance Act 1995 and limited capacity of the onshore reinsurance market.
issues licences to insurers, brokers and loss adjusters. The
Insurance Commissioner is responsible to the Ministry of No entity shall become a ‘shareholder controller’ or ‘indirect
Treasury. shareholder controller’ of a life insurer without the prior
approval of the Central Bank as regulator. A person is a
The regulator of life insurance is the Bank of Papua New ‘shareholder controller’ when that person accumulates more
Guinea (Central Bank) which administers the Life Insurance than a 15 per cent stake in a licence holder and an ‘indirect
Act 2000 and issues licences to life insurance companies and controller’ means a person in accordance with whose
brokers. directions the directors are accustomed to act.
The following entities/persons require authorisation: Each corporate shareholder controller (and each of its
Insurers (life and general), reinsurers, insurance agents executive officers and shareholder controllers and indirect
(persons who provide marketing, administration, shareholder controllers) and each executive officer of an
management or any other services to any licensed insurer), insurer must satisfy fit and proper criteria.
insurance brokers and loss adjusters.
Insurers must reapply for their licences annually. Pursuant Yes, which amounts must be deposited with the Central
to section 64c of the Insurance Act insurers and brokers Bank:
must pay an amount not exceeding one per cent of premium
income to the Commissioner’s Fund. Life insurers pay an General insurers: PGK2,000,000
annual licence fee only.
Life insurers: PGK4,000,000 plus, the Central Bank may
02 | Subsidiary/branch require that the life insurer be entitled to the benefit of an
A life insurer must be a locally incorporated corporation. approved guarantee of not less than PGK4,000,000.
Likewise a general insurer must be a locally incorporated A life insurer shall also establish a statutory fund for all
corporation with the exception of some insurers that were policyholder assets (separate funds for PNG policies and
licensed as overseas branches under previous legislation. offshore policies).
PGK$3.00 = US$1.00 as at January 1, 2016
In either case, if an insurer is foreign owned or controlled it

must be certified under the Investment Promotion Act 1997 06 | Risk based capital
to carry on business in PNG. General Insurers have a risk based capital regime modelled
on the Australian Prudential Supervisory Authority’s risk
03 | FDI restrictions based capital model as at 2008:
Nil, other than satisfying the Investment Promotion
Authority requirements noted in 2 above. • Minimum Capital Requirement = Liability Risk Charge
+ Asset Risk Charge + Excessive Exposure Risk Capital
Charge.
• Life Insurers have a risk based capital regime.

Papua New Guinea-
• The Solvency Requirement is intended to ensure solvency

in the event that a company ceases writing new business.
• The Capital Adequacy Requirement is intended to ensure

solvency on a going concern basis for the next three years
assuming future experience is in line with Best Estimate
Assumptions.
No. But the Central Bank may exercise its powers against
any parent, controller or controller of any subsidiary of a life
insurer.
There are no separate policyholder protection funds.
Policyholders have the benefit of the deposits and

guarantees.
Life insurance policyholders also have the benefit of the

statutory fund relating to the life insurance business. The
fund gives priority to the interest of the policyholders and
has restrictions on its liabilities and expenditure.
Under the Insurance Act any licensed insurer wishing to
transfer any insurance business is required to make an
application to the insurance Commissioner to approve the
transfer scheme. The scheme must set out in detail how the
transfer of insurance business is to be implemented.
Alternately application may be made to the National Court.
10 | Outsourcing
There is no restriction on what activities an insurer may
outsource and no requirement for regulatory approval
for outsourcing. However formal agreements with agents
are required and may be monitored by the Insurance
Commissioner. Responsibility for the outsourced service
remains with the insurer.

The Philippines
Contributed by: SyCip Salazar Hernandez & Gatmaitan
01 | The regulator Control means power to direct or cause the direction of the
The Insurance Commissioner is the insurance regulator. management and policies of the domestic insurer, and is
The position is the head of the Insurance Commission, a presumed to exist when one person owns, controls or holds,
government agency under the Department of Finance. 40 per cent or more of the voting shares of the domestic
insurer.
The Commission supervises and regulates the operations
of insurance and reinsurance corporations, mutual benefit Directors and officers must satisfy fit and proper criteria.
associations, health maintenance organisations and rating
organisations, all of which need to be authorised. 05 | Minimum capital
Existing domestic insurers (life or non-life):
Pre-need companies – companies that provide pre-need
contracts, being contracts for the provision of future • 250,000,000 by June 30, 2013
payments or services including life, pension, education • 550,000,000 by December 31, 2016
and interment – must also be licensed by the Insurance • 900,000,000 by December 31, 2019
Commission. • 1,300,000,000 by December 31, 2022.
Insurance agents, general agents, resident agents, A new domestic insurer (life or non-life) must have paid up
underwriters, insurance brokers, adjusters, actuaries, and capital of at least PHP1,000,000,000.
trustees for charitable uses must be licensed.
A new foreign insurer (life or non-life) must have unimpaired
Authorisations and licences must be renewed every three capital or assets and reserve of at least PHP1,000,000,000. It
years. must also deposit with the Insurance Commissioner, for the
benefit of policyholders and creditors of the foreign insurer
02 | Subsidiary/branch in the Philippines, securities which have a market value of
Locally incorporated corporations (domestic insurer) and not less than PHP1,000,000,000. The securities have to be
branches of foreign insurers and reinsurers (foreign insurer) acceptable to the Insurance Commissioner and at least 50
are permitted to be licensed and carry on business in the per cent of them have to be bonds or other instruments of
Philippines as an insurer, reinsurer or pre-need company. debt of the Government of the Philippines.
A foreign insurer, non-resident foreign reinsurer, or non- Pre-need companies already existing at the time the Pre-
resident foreign reinsurance broker must appoint a resident Need Code took effect on 18 December 2009 must have
agent. minimum paid-up capital of:
03 | FDI restrictions • PHP50,000,000 for companies selling a single plan

There is no limit on foreign equity ownership in a domestic
insurer. • PHP75,000,000 for companies selling two types of plan
Foreign equity ownership in a domestic loss adjuster • PHP100,000,000 for companies selling at least three
company cannot exceed 40 per cent. types of plans, and those selling traditional education
plans.
No person, other than an authorised domestic insurer, may A corporation applying for registration to act as an issuer of
acquire control of any domestic insurer without giving pre-need plans after the effectivity of the Pre-Need Code must
20 days’ prior written notice to the domestic insurer of its have a minimum paid-up capital PHP100,000,000.
intention to acquire control, and without obtaining the prior
written approval of the Insurance Commissioner.

The Philippines-
A trust fund for each category of pre-need plan category must

be established.
PHP$47.05 = US$1.00 as at January 1, 2016
The paid-up capital and other requirements to establish a

micro-insurance company will be prescribed under rules and
regulations to be issued by the Insurance Commissioner.

Yes: for life insurers RBC takes into account asset default risk,
insurance pricing risk, interest rate risk and general business
risk. For non-life insurers, RBC takes into account fixed
income securities, equity securities, credit risk, loss reserves
and net written premiums. Each insurance company must
maintain a minimum RBC ratio of 100 per cent.
The Insurance Commissioner has rights of examination in
respect of any holding company of an insurer/reinsurer and
any related party transactions.
Each insurer contributes to a Security Fund, depending on
whether it is engaged in life or non-life insurance business.
The Security Fund has a Life Account and Non-Life Account.
The contribution of each insurer to the Security Fund is in
direct proportion to the ratio that that insurer’s net worth
bears to the total net worth of the life/non-life industry.
The aggregate contribution of all relevant insurers to each
account is PHP5,000,000.
Portfolio transfer is permissible with prior approval of the
Insurance Commissioner and of the policyholders.
10 | Outsourcing
Activities regulated by the Insurance Code cannot be
outsourced unless the contractor has the requisite
license. Generally, ‘backroom activities’ such as claims
administration services, intermediary servicing and contact
centre services, and mailing services may be outsourced.

Singapore
01 | The regulator The chairman, all directors and key executives must satisfy
The Monetary Authority of Singapore (MAS) is the central the MAS fit and proper criteria and be approved by the MAS.
bank of Singapore. It administers the Insurance Act (Cap
142) which has provisions governing the regulation of 05 | Minimum capital
insurance business in Singapore, insurers (including, Licensed Insurer S$10 million
reinsurers), insurance intermediaries (agents and brokers) Licensed Reinsurer S$25 million
and related institutions in Singapore. Licensed Insurer S$5 million
(writing specific lines of business)
Both Singapore incorporated entities (including subsidiaries An authorised reinsurer shall maintain a minimum deposit
of foreign insurers) and branches of foreign insurers are of S$2 million for each class of reinsurance business for
permitted to carry on insurance business in Singapore if they which it is authorised.
satisfy the relevant licensing requirements. S$1.4141 = US$1.00 as at January 1, 2016
Insurers and reinsurers with an establishment in Singapore 06 | Risk based capital

must be ‘licensed’. Every licensed insurer shall establish and maintain a
separate insurance fund for each class of business carried on
Reinsurers without an operating presence in Singapore may by that insurer, and this applies to both Singapore policies
become ‘authorised’ which allows them to solicit business as well as offshore policies. A life insurer shall also have
and collect premiums in Singapore. separate funds for investment-linked, participating and non-
participating policies.
Foreign insurers which are approved under the law of
another country/territory to carry on insurance business in An Insurer must hold capital against its risk exposures,
that country/territory may carry on business in Singapore known as Total Risk Requirements (TRR), for each insurance
under a foreign insurer scheme established by the MAS. fund and the insurer in aggregate.
Representative offices must be ‘registered’. TRR is calculated in three components: C1 – insurance risks,
C2 – asset portfolio risks, including market and credit risks
03 | FDI restrictions and C3 – asset concentration risks.
None.
The MAS is currently reviewing its regulatory capital
04 | Control approvals framework. Under the revised framework, the risk
Prior approval of the MAS must be obtained before obtaining requirements will be calibrated based on a specified risk
an interest in ≥ 5 per cent of the voting shares of, or entering measure – Value at Risk (VaR), confidence level and time
into any agreement to act in concert with any other person in horizon.
relation to the exercise of rights in relation to ≥ 5 per cent of
the voting rights of, a licensed insurer in Singapore. Two solvency intervention levels are proposed:
The MAS’ prior approval should also be obtained before • Prescribed Capital Requirement (PCR) = VaR at a 99.5
obtaining effective control of a licensed insurer incorporated per cent confidence level over a one year period.
in Singapore.
• Minimum Capital requirement (MCR) = VaR at a 90 per
All controllers must be approved by MAS as fit and proper. cent confidence level over a one year period. NB MCR will
A licensed insurer must have a Board chairman, chief be calibrated as a fixed percentage of PCR.
executive and an appointed actuary (life) or certifying
actuary (non-life) and such other positions as are prescribed. PCR and MCR will be calculated for each insurance fund and
the insurer in the aggregate.

Singapore-
The MAS will regulate insurance groups headquartered in
Singapore as well as sub-groups domiciled in Singapore that
are significant to the Singapore financial system unless there
is adequate group-wide supervision by another regulator.
A ‘group’ arises where a parent entity (non-operating

financial holding company) holds an insurance subsidiary in
Singapore or a Singapore licensed insurer has subsidiaries,
whether within or outside of Singapore.
The Policy Owners’ Protection (PPF) Scheme provides 100
per cent coverage to individuals for guaranteed benefits of
life insurance policies (subject to caps), to all insureds for
compulsory general insurance policies and to individuals
with Singapore policies of specified personal lines policies.
Yes. The transferor may apply to the court to approve a
scheme of transfer of whole or part of an insurance business,
subject to MAS prior consent. An independent actuarial
report may be required. Notification to policyholders by
Gazette/newspaper advertisement is required before an
application is made to the Court. The Court has ultimate
discretion whether to approve the scheme.
10 | Outsourcing
Outsourcing is permitted, including to an offshore service
provider. An insurer must notify the MAS when it is planning
or has entered into material outsourcing or plans to vary any
material outsourcing. Outsourcing of all or substantially all
risk management and internal control functions, including
compliance, internal audit and financial accounting is to be
considered material.
All outsourcing arrangements must be agreed in writing

and contain minimum specified terms. The agreement must
allow the insurer and the MAS to audit the service provider.
If the outsourcing involves the collection, use or disclosure

of personal data, the insurer must also ensure that its
service provider protects the confidentiality of customer
information.
The MAS in September 2014 issued two consultation papers

on its proposed revision to its Guidelines on Outsourcing
and a Notice on Outsourcing. These propose minimum
standards for outsourcing and broaden the scope of material
outsourcing.

South Korea
Contributed by: Kim & Chang

The Financial Services Commission (FSC) oversees the An insurance company must maintain a solvency margin
establishment of financial policies, enactment and that is at least equal to the solvency margin standard, i.e.
amendment of insurance related laws and regulations and 100 per cent.
the grant of insurance business licences. The Financial
Supervisory Service (FSS) which is the executive arm of the The solvency margin ratio is the ratio of solvency margin to
FSC conducts day to day supervision of the operations and solvency margin standard. The solvency margin is calculated
financial status of insurance related institutions (insurers, by aggregating contributed capital, retained earnings, capital
brokers and agents) and supplemental activities for the FSC. surplus and other items recognised as capital. The solvency
margin standard is intended to be a reflection of the risk
An ‘insurance product’ is defined as a contract that stipulates borne by an insurance company: insurance risk, interest risk,
the payment of money and other benefits to the insured credit risk, market risk and operational risk.
in connection with the occurrence of a contingency, for
the purpose of guaranteeing risk and in exchange for If the solvency margin drops below 100 per cent then the
consideration. Insurance products fall into three categories: FSC may intervene.
life, non-life and a third being agreed benefits payable in
respect of accident, disease or nursing services. 06 | Risk based capital
Yes, since April 1, 2011.
Insurance business includes underwriting insurance KRW$1,175.95 = US$1.00 as at January 1, 2016
products, collecting premiums and distribution of insurance

payments. All insurers and reinsurers must be licensed by 07 | Group supervision
the FSC. Some of the regulatory restrictions on insurance companies’
asset management relate to transactions between insurance
Insurance brokers must be registered with the FSS having companies and their affiliates (e.g. if an insurance company
met certain training and other requirements. acquires bonds or stock issued by an affiliate in an amount
not less than 0.1 per cent of shareholders’ equity or KRW1
Individual insurance solicitors and insurance agents must billion, whichever is less, the insurance company is required
register with the insurance association after meeting certain to report the transaction to the FSC and issue a public
training requirements. disclosure on its website).
02 | Subsidiary/branch Further, insurance companies held by holding companies

Both Korean incorporated entities and branches of a foreign are subject to regulations on incorporation, acquisition of
insurer or reinsurer are permitted. new subsidiaries, management and other matters under the
Financial Holding Companies Act.
No. 08 | Policyholder protection
Yes. The Korea Deposit Insurance Corporation (KDIC)
04 | Control approvals maintains a deposit insurance fund that is dedicated to
‘Large’ shareholders (≥ 10 per cent of total shares) must meet protecting policyholders and other customers in the event
the financial soundness and other requirements and be pre- of insurer default. Coverage is capped at KRW50 million per
approved by the FSC. Requirements depend on nationality insurance policy.
and the type of proposed shareholder.
Any subsequent increase or reduction of shareholding by ≥ 1

per cent by a large shareholder must be notified to FSS by the
insurer.

South Korea-
09 | Portfolio transfers customer financial transaction information; or (iii) within 10

Yes. Policies that share the same basis for liability reserve days from the execution of the relevant offshore or onshore
calculation may be transferred together. Prior approval outsourcing agreement where the outsourcing of financial
of the FSC is required, and public notice of the proposed transaction information processing does not include
transfer must be issued and policyholders must be given at identifiable individual customer information.
least one month’s notice to object. The transfer is effected
by agreement between the transferor and the transferee, Under the IT Outsourcing Regulations, the outsourcing of
subject to FSC approval. In the event more than ten per non-financial transaction information processing is subject
cent of the total policyholders (in terms of either number to after-the-fact semi-annual report to the FSS.
of policyholders or insured amount) object to the intended
policy transfer, the transfer will not be allowed.
In case of a policy transfer, there will be a ‘black-out’

period starting on the execution date of the policy transfer
agreement. During this period, the transferor cannot sell
new insurance policies.
10 | Outsourcing
The Regulations on the Delegation of Business of a Financial
Institution (the Delegation Regulation) prohibit a financial
institution from delegating its ‘core’ business activities to a
third party.
Core business activities include: solicitation and execution

of insurance contracts, product disclosure, underwriting
discretion, contractual matters relating to policies (e.g.
termination and reinstatement), management of premium
receipts, cession and assumption of reinsurance contracts,
determination and payment of insurance claims.
Any outsourcing of non-core activities must be notified to

the FSS at least seven days prior to the execution of the
outsourcing agreement.
However, the IT outsourcing by financial institutions is

separately governed by the Regulations for Outsourcing of
Data Processing by Financial Institutions (the IT Outsourcing
Regulations).
The IT Outsourcing Regulations provide different reporting

requirements to the FSS for the outsourcing of financial
transaction information (i.e. information collected from a
customer in the course of a financial transaction or produced
as a result of a financial transaction). There must be a report
to the FSS: (i) 30 days prior to the date of execution of the
relevant outsourcing agreement in case of the offshore
outsourcing, where there will be processing of identifiable
individual customer financial transaction information;
(ii) 7 days prior to the date of execution of the relevant
outsourcing agreement in case of the onshore outsourcing,
where there will be processing of identifiable individual

Sri Lanka
Contributed by: Julius & Creasy
01 | The regulator A director of one insurer cannot be a director for any other
The Insurance Board of Sri Lanka (IBSL) is responsible insurer unless it is a subsidiary or associate of the first insurer.
for the development, supervision and regulation of the
insurance industry. 05 | Minimum capital
The minimum capital requirement is LKR 500* million per
The Regulation of Insurance Industry Act, No. 43 of 2000 class of insurance business.
(as amended) (Insurance Act) governs inter alia the licensing LKR$144.62 = US$1.00 as at January 1, 2016
and regulation of insurance companies, brokers, agents and

loss adjusters. 06 | Risk based capital
The IBSL is in the process of introducing a Risk Sensitive
The IBSL is a member of the International Association of Minimum Capital Model for insurance companies. It has
Insurance Supervisors (IAIS) and adopts some of the core requested all insurance companies to obtain a rating on
principles for effective supervision and monitoring of the Insurer’s Financial Strength (IFS) and the Claims Paying
insurance industry. Ability (CPA). However, there have been no statutory
amendments to the law in this regard to date.
Only companies incorporated in Sri Lanka may be registered Currently a solvency margin regime applies as follows:
to carry on business as an insurer or insurance broker. All
insurance companies must be listed on the Sri Lankan stock • life insurers must maintain a solvency margin not less
exchange, unless exempted, within three years of obtaining than five per cent of the value of their liabilities
a licence to operate.
• non-life insurers must maintain a solvency margin of not
All composite insurers have four years from 2011 to less than the highest of:
segregate into separate companies for their life and general
businesses. —— LKR50 million or
There is a prohibition on cross holdings and common —— 20 per cent of net premium or
directorships between insurers and broking companies.
—— 40 per cent of average net outstanding claims for the
03 | FDI restrictions three years immediately preceding the current year.
None. Foreign equity participation in insurance companies is
permitted up to 100 per cent. 07 | Group supervision
The IBSL does not supervise the parent of an insurance
04 | Control approvals company or any subsidiaries of an insurance company, not
Any change in the shareholders of an insurance company engaged in the business of insurance.
must be notified to the IBSL immediately after the event.
This is on account of the statutory requirement to submit, 08 | Policyholder protection
to the IBSL, a full authenticated statement of any change in The Minister of Finance has levied a ‘Cess’ on the annual
the statement submitted to the IBSL on registration, of the net premium income of insurers for the creation of the
insurance company, which statement sets out prescribed Policyholders Protection Fund. 0.2 per cent on the annual
particulars relating to the shareholders of the company. net premium of long term insurance business and 0.4
per cent on the annual net premium of general insurance
In practice, insurance companies notify the IBSL of any business is credited to the Policyholders’ Protection Fund.
change of control prior to such event. As per the 2014 Annual Report of the IBSL this amount
is invested in government securities and the accumulated
The Insurance Act imposes fit and proper criteria for all amount in the Fund as at December 31, 2014 was LKR
directors of insurers. 2,185billion.

Sri Lanka-
An insurance company may apply to Court to approve a
transaction relating to any transfer and amalgamation of
insurance business. The insurer must first have approached
the IBSL and have obtained its observations thereon.
The Court has the discretion to approve or decline the

application if the IBSL does not support the proposal and/or
policyholders object.
10 | Outsourcing
The IBSL may grant permission to an insurer to keep assets
outside Sri Lanka upon IBSL being satisfied that the value of
assets permitted to be kept outside of Sri Lanka (i) will not
exceed 20 per cent of the total assets of the insurer at any
given time, and (ii) (of any single person) will not exceed five
per cent of the value of assets permitted to be kept outside
Sri Lanka at any given time; and upon the insurer providing
a written assurance that documents evidencing the insurer’s
title to such assets are kept safe in Sri Lanka.
There are no statutory restrictions on using a service

company for ‘back office’ operations such as human
resources, photocopying and claims processing (excluding
the activities of a loss adjuster).

Taiwan
Contributed by: Lee and Li, Attorneys at Law

Taiwan is officially known as the Republic of China (ROC). Minimum paid-up capital requirement:
The ROC insurance regulator is the Financial Supervisory
Commission (FSC). • Insurance companies NT$2 billion, 20 per cent
to be paid in at the time of
Insurers must be licensed and will be either life or non- life. application
Composite licences are not granted to insurers, but are • Insurance brokers NT$5 million
available for reinsurers. • Reinsurance brokers NT$10 million
• Insurance agent companies T$5 million
A company carrying on business as an insurance broker, • Insurance adjustor companies NT$2 million.
insurance agent or loss adjuster must be approved by FSC
and at least one individual must be appropriately qualified. A branch of a foreign insurer must have minimum operating
funds of NT$50 million. If the foreign insurer has been in
02 | Subsidiary/branch operation for less than three years, it must have minimum
Both Taiwanese incorporated entities (including subsidiaries paid-up capital of NT$2 billion or meet the FSC’s credit
of foreign insurers) and branches of foreign insurers are rating requirements.
permitted.
A branch of a foreign insurance broker or a foreign insurance
A foreign insurer that has been in operation for more agent company must have minimum operating funds of
than three years must have sound business and financial NT$5 million.
ability and have no record of material violation of laws and
regulations in order to be permitted to establish a branch. A branch of a foreign insurance adjustor company must have
minimum operating funds of NT$2 million.
A foreign insurer that has been in operation for less than
three years must establish a representative office within ROC A branch of a foreign insurance enterprise applying to
for at least one year before establishing a branch. simultaneously operate insurance broker business and
reinsurance brokering business must have minimum
03 | FDI restrictions operating funds of NT$10 million.
Nil. NT$ 33.05 = US$ 1.00 as at January 1, 2016
04 | Control approvals 06 | Risk based capital

Prior approval from the FSC is required to acquire more than Yes. An insurance company must maintain a ratio of total
each of 10 per cent, 25 per cent or 50 per cent of the voting adjusted net capital to its risk-based capital requirement of
shares in an insurance company. at least 200 per cent. The risk based capital requirement is
determined by a formula that takes into account asset risk,
Any person who acquires more than 5 per cent of an insurance risk, interest rate risk and business risk.
insurance company’s shares must notify the FSC within 10
days of such acquisition. Any subsequent and cumulative 07 | Group supervision
increase or decrease of more than 1 per cent must similarly No.
be notified to the FSC.
Shares held by nominees and related parties are aggregated

for the purpose of assessing whether the limits have been
reached.

Taiwan-
08 | Policyholder protection Prior approval from the FSC is required to outsource any
Yes. The Stabilization Fund is a private organisation, and all of the business operations identified above to a
sponsored by insurance companies, established to stabilise foreigner/ foreign company. Branches of foreign insurance
the market and safeguard the interests of insured parties. companies in Taiwan that outsource their operations to their
The Stabilization Fund may provide loans to insurers head office or other overseas branches for internal division
experiencing business difficulties, advance claims payments of labor purpose shall also apply for FSC’s prior approval.
to insureds or beneficiaries if an insurer is unable to make However, such FSC’s prior approval is waived where the
payments, and make other payments approved by the FSC. insurance company engages an offshore institution to assist
in the handling of claims, emergency rescue, investigation
09 | Portfolio transfers or assessment, the insurance company outsources the
Yes. An insurance company and/or a branch of a foreign development and maintenance of its onshore information
insurer may apply to the FSC for approval to transfer all or systems to an offshore institution, or others stipulated
part of its insurance business to another Taiwanese insurer by Directions for Operation Outsourcing by Insurance
or Taiwanese branch of a foreign insurer. In practice, prior Enterprises.
notice is often given to policyholders to give them the
opportunity to object. If no objection is received within the (See: Directions for Operation Outsourcing by Insurance
specified period, consent is deemed. Enterprises, announced on 21 July 2010 and amended on 30
December 2014.)
10 | Outsourcing
The outsourcing of business operations by an insurer is
limited to the following: (1) logistical support for data
processing; (2) conducting investigations relating to
insurance contracts and consumer opinion surveys; (3)
forms and documents relating to the performance of
insurance contracts; (4) overseas emergency assistance and
roadside assistance services provided under the insurance
contract; (5) distribution of sales advertisements and
consumer publications; (6) collection of premiums, principal
and interest payments on policy loans or other loans,
provided the service provider is engaged in accordance
with the self-regulatory rules promulgated by the FSC; (7)
collection of debts; (8) electronic customer services; (9)
real estate related activities; (10) locating cars with auto
loan default and sale at car auction, but excluding the
determination of floor price for auction; (11) valuation,
classification, bundling and sale of non-performing loans;
and (12) other operations approved by the competent
authority.
Prior approval from the FSC is required to outsource the

business operations identified in items (7) and/or (12) to a
local person/company.

Thailand
01 | The regulator Risk Capital Requirement is capital charges for insurance

The Office of Insurance Commission, under the supervision risk, market risk, credit risk and concentration risk.
of the Ministry of Finance (OIC) regulates insurers, brokers
and agents. Solvency margin: minimum capital requirement of 140 per
cent of risk based capital.
Both are permitted for an insurer; however the OIC’s current 07 | Group supervision
policy is not to grant new licences for either on the basis that No.
the insurance company market requires consolidation.
Brokers can be individuals or a legal entity in Thailand. Only Yes. The General Insurance Fund and the Life Insurance
individuals can be insurance agents. Fund (funded by industry levies) assist policyholders of non-
life and life insurers respectively in the event of revocation of
03 | FDI restrictions an insurance licence. Payments are limited to THB1 million.
Insurance and reinsurance companies:
Following revocation of an insurance licence and prior to
• up to 25 per cent permitted commencement of bankruptcy/liquidation proceedings,
• up to 49 per cent with approval of the OIC any insured with a claim under a policy will be entitled to
• above 49 per cent with approval of the Minister of payment firstly from securities placed by the insurer with
Finance. the OIC, and secondly from the relevant fund. In insolvency
proceedings, the policyholder will have priority over other
Brokers can be 100 per cent foreign owned, but if > 49 per creditors against any securities and unearned premiums
cent they need a licence under the Foreign Business Act. reserves of the relevant insurer placed with the OIC.
04 | Control approvals 09 | Portfolio transfers

A change of shareholdings ≥ five per cent must be notified No regime.
after the event to the OIC. A change in directors must be
approved by the OIC. 10 | Outsourcing
Insurer may not outsource ‘core’ functions, which include:
05 | Minimum capital risk underwriting & issue of policy, collecting premiums,
• Life insurer/reinsurer: THB500 million accepting or rejecting claims and loss adjustment. With
(min registered capital) specific approval of the OIC, insurer may outsource certain
‘support’ functions, which include: paying claims under
• General insurer/reinsurer: THB300 million limited circumstance. Insurer may freely outsource ‘other’
(min registered capital) non-core administrative functions, which include: Internal
THB$36.00 = US$1.00 at January 1, 2016 audit, accounting, IT and advisory services in respect of
claims and back office functions.
Yes – Eligible Capital/Risk Capital Requirement x 100 per
cent = risk based capital.
Eligible Capital is equity, share premium, retained

profits, issued price of preference shares, etc. less certain
deductions. Assets are valued at market value with
adjustments.

Thailand/Vietnam-
Vietnam
Contributed by: Vision & Associates Legal
01 | Regulator To establish offices in cities or provinces in Vietnam

The Ministry of Finance (MOF) is responsible for supervising other than the city or province where the company was
the insurance market in Vietnam. The MOF has the power to established, companies must establish branches or
grant and withdraw licences and has authority to issue legal representative offices in those other provinces and cities.
documents circulars/decisions) which provide guidelines Approval from the MOF is needed for each branch.
for the operation and other activities of insurers/reinsurers/
insurance agents and insurance brokers. The Insurance Foreign insurers or brokers can establish representative
Supervisory Authority (ISA, which is part of the MOF) assists offices in Vietnam. The foreign insurer or broker must have
the MOF in supervising the insurance business and market been operating for at least five years and must have ‘a
in Vietnam. co-operative relationship with the Vietnamese bodies and
organisations.’ Representative offices are not permitted to
02 | Branch/subsidiary conduct insurance business in Vietnam.
Pursuant to the Schedule of Specific Commitments in
Services annexed to the Protocol of Accession of Vietnam to 03 | FDI restrictions
WTO (Vietnam’s WTO Commitments), Nil. All restrictions on the ability of foreign insurers to
establish 100 per cent foreign-owned subsidiaries were
Offshore insurers are permitted to provide (cross-border) into removed on 1 January 2008 according to Vietnam’s WTO
Vietnam: Commitments. Some restrictions remain on the ability of
foreign life insurers to establish branches in Vietnam.
• insurance services (excluding life and health insurances)
to companies where foreigner(s) own(s) more than 49 per 04 | Control approvals
cent of charter capital and to foreign individuals working Divisions, splits, mergers, amalgamations, conversions of
in Vietnam the form, or transfers of 10 per cent or more of the charter
capital of an insurer or insurance broker require prior written
• reinsurance services approval of the MOF. Approvals from MOF are also required
for a wide range of changes including a change of the
• insurance services in international transportation, Chairman of the Board of Directors, General Director (CEO),
including insurance of risks relating to: (i) international or Appointed Actuary.
maritime transport and international commercial aviation
with such insurance to cover any or all of the following: 05 | Minimum capital
the goods being transported, the vehicle transporting the Minimum paid-up capital of:
goods and any liability arising there-from; and (ii) goods
in international transit • General and health insurer VND300 billion
• Life insurer VND600 billion
• insurance broking and reinsurance broking services
• Reinsurer VND400 billion
• consultancy, actuarial, risk assessment and claim (general and health insurance)
settlement services.
• Reinsurer VND700 billion
(life and health insurance)
Except as provided above, no person may use insurance
services provided by offshore insurers into Vietnam. • Reinsurer VND1,100 billion
(all types of insurance)
Life insurers established in Vietnam must operate through • Branch of foreign insurer VND200 billion
a locally established company and general insurers may
operate through either a locally established company or as • Broker VND4 billion
a branch of a foreign insurer. As a practical matter, the MOF (either primary insurance or
treats the establishment of a branch by a foreign insurer reinsurance brokerage)
similarly to the establishment of a subsidiary.

Extra paid-up capital required: amounts to 5 per cent of total assets of a general insurer or a
foreign general insurer’s branch, or to 3 per cent in the case
• Insurer with aviation insurance, satellite insurance: of a life insurer.
VND50 billion for each type of insurance (as from
October 1, 2012) 09 | Portfolio transfer
The transfer or assignment of insurance policies, which
• Insurer with investment-linked insurance, pension include all policies within one or a number of types of
insurance: To be further guided by the MOF insurance products, may be transferred or assigned in one of
the following cases: (A) an insurer is in danger of becoming
• Insurer with more than 20 branches and representative insolvent; (B) an insurer divides, splits, consolidates, merges
offices: VND10 billion for each additional branch or or dissolves; (C) pursuant to an agreement between insurers.
representative office (as from October 1, 2012) In the case of an insurer in danger of becoming insolvent or
upon dissolution, where agreement cannot be reached on
• Broker (both primary insurance and reinsurance the assignment of its insurance contracts to another insurer,
brokerage): VND4 billion. the MOF shall appoint an insurer to accept the assignment.
VND$22,727.27 = US$1.00 at January 1, 2016 The transferor must apply for the MOF’s written approval
before conducting the assignment. Within 15 days from the
Idle capital may only be invested in Vietnam. date of MOF’s approval, the transferor must make a public
announcement of the assignment on two central newspapers
06 | Risk based capital in five consecutive issues and must notify the policyholders
No – capital based. in writing, who will be entitled to terminate their policies
with 15 days from the date of receipt of the notice of the
The minimum solvency of a general insurer is the greater of transferor if they do not agree with the assignment plan.
either 25 per cent of the total premiums actually retained
at the time of determination of the solvency margin or 12.5 All works related to the assignment must be finished within
per cent of the total primary insurance premiums plus 60 days from the date of MOF’s approval.
reinsurance premiums at the time of determination of the
solvency margin. In the case of assignment of the whole of the insurance
policies within one or a number of types of insurance
The minimum solvency of a life insurer is 4 per cent of the products, the insurer must forward a written request to
insurance reserves and 0.1 per cent of the sums insured the MOF for amendment of or addition to its licence for
which carry risks for policies with term of five years or less establishment and operation.
and 4 per cent of the insurance reserves and 0.3 per cent of
the sums insured which carry risks for policies with term of 10 | Outsourcing
over five years. There are no specific regulations restricting outsourcing
of particular functions of a Vietnamese insurer. Payments
Insurers and brokers must also establish a reserve fund to from Vietnam are subject to foreign exchange approval. If
ensure their solvency. The annual contribution is 5 per cent the outsourcing is to a group company and if payment is
of after-tax profits up to a maximum of 10 per cent of insurer to be made by the Vietnamese subsidiary or branch, as a
or broker’s charter capital. matter of prudence, a written contract should be entered
into and provided to the remitting bank before the contract
07 | Group supervision commences.
No.
Insurers must establish a policyholder protection fund
to protect insured persons in the event that the insurer
becomes insolvent or bankrupt. Appropriations for this
fund will be announced by the MOF annually and must be
made biannually, but will not exceed 0.3 per cent of total
premium revenue retained from primary insurance contracts.
Contributions will be required until the accumulated fund

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Editor
Anna Tipping
Partner, Singapore
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anna.tipping@nortonrosefulbright.com
Contacts
Australia Singapore
Ray Giblett Magdalene Teo-Yong
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Tel +61 2 9330 8531 Tel +65 6309 5313
ray.giblett@nortonrosefulbright.com magdalene.teo-yong@nortonrosefulbright.com
China Thailand
Lynn Yang Sarah Chen
Partner, Shanghai Of counsel
Tel +86 21 6137 7022 Tel +662 205 8518
lynn.yang@nortonrosefulbright.com sarah.chen@nortonrosefulbright.com
Hong Kong
Declan McDaid
Partner, Hong Kong
Tel +852 3405 2563
declan.mcdaid@nortonrosefulbright.com

Contributing law firms

Cambodia Malaysia Philippines
Antoine Fontaine Idahani Ismas Ismail Hiyasmin H. Lapitan
Partner Partner Partner
Bun & Associates Zaid Ibrahim & Co SyCip Salazar Hernandez & Gatmaitan
Tel +855 23 999 567 a member of ZICOlaw Tel +632 982 3500
fontaine@bun-associates.com Tel +603 2087 9852 hhlapitan@syciplaw.com
idahani.ismas@zicolaw.com
India South Korea
Leena Chacko Mongolia Jay H. Ahn
Partner Bayar Budragchaa Partner
Cyril Amarchand Mangaldas Managing Partner Kim & Chang
Tel +91 22 2496 4455 ELC LLP Advocates Tel +82 2 3703 1058
leena.chacko@cyrilshroff.com Tel +976 88105991 jhahn@kimchang.com
bayar@elclawoffice.mn
Indonesia Sri Lanka
Teddy Achmad Suprijadi Myanmar Diluka Rodrigo
Partner James Finch Partner
Makarim & Taira S. Partner, Managing Director Julius & Creasy
Tel +6221 252 1272, 520 0001 DFDL Tel +9411 2422601-5, ext 271
Teddy.Suprijadi@makarim.com Tel +95 1 540 995 diluka@juliusandcreasy.com
james.finch@dfdl.com
Japan Taiwan
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Partner David Ireland Partner
Nishimura & Asahi Partner Lee and Li, Attorneys at Law
Tel +81 3 5562 8500 Kensington Swan Tel +886 2 2715 3300
s_takahashi@jurists.co.jp Tel +64 4 472 7877 ctchang@leeandli.com
david.ireland@kensingtonswan.com
Macau Vietnam
Rui Pinto Proença Papua New Guinea Luu Tien Ngoc
Partner John Leahy Partner
MdME Partner Vision & Associates Legal
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Financial institutions

2016: Insurance regulation

A Norton Rose Fulbright guide

Papua New Guinea 30

01 | The regulator 04 | Change of control approvals

Responsibility for the prudential supervision of private health

EFLIC, foreign-owned subsidiaries and branches of foreign 07 | Group supervision

06 Norton Rose Fulbright – January 2016

APRA can impose directions on the insurer or NOHC to take 10 | Outsourcing

The insurer must provide a copy of the scheme to APRA

Norton Rose Fulbright – January 2016 07

01 | The regulator 05 | Minimum capital

on October 22, 2001, which remains in force. The new

03 | FDI restrictions in each case assessed on the previous year’s premiums.

Management individuals are subject to agreement from the

08 Norton Rose Fulbright – January 2016

On liquidation of a life insurance company there is no

However, the new Law on Insurance imposes a priority of

• remuneration and other expenses related to the

• claim for the insurance indemnity

• claim by the insurance policy holder

• salary of employee and worker, administrative fees, court

• tax duty of the state without deposit of the notification

• recognised unsecured claim.

Norton Rose Fulbright – January 2016 09

01 | The regulator Branches:

Directors and controllers must be approved by CIRC as ‘fit

10 Norton Rose Fulbright – January 2016

In the event of insolvency or revocation of licence of a non-

In the event of insolvency or revocation of licence of a life

Norton Rose Fulbright – January 2016 11

01 | The regulator 02 | Subsidiary/branch

12 Norton Rose Fulbright – January 2016

06 | Risk based capital 08 | Policyholder protection

Norton Rose Fulbright – January 2016 13

14 Norton Rose Fulbright – January 2016

01 | The regulator 05 | Minimum capital

03 | FDI restrictions 06 | Risk based capital

Norton Rose Fulbright – January 2016 15

16 Norton Rose Fulbright – January 2016

01 | The regulator 06 | Risk based capital

Norton Rose Fulbright – January 2016 17

policyholders must be informed of the transfer in writing.

18 Norton Rose Fulbright – January 2016

Insurers and reinsurers must be licensed by the Prime 05 | Minimum capital

02 | Subsidiary/branch 06 | Risk based capital

Norton Rose Fulbright – January 2016 19

Less than 0% FSA will order partial or total suspension 10 | Outsourcing

In addition, they may:

• provide financial assistance for the transfer or payment

• assume insurance contacts of a bankrupt insurer

• purchase rights to insurance claims of a bankrupt insurer.

The corporations are funded by industry levies.

20 Norton Rose Fulbright – January 2016

01 | The regulator 05 | Minimum capital

A company carrying on business as an insurance broker or • Insurance broker companies MOP25,000

operation for more than five years in its country or territory

Norton Rose Fulbright – January 2016 21

22 Norton Rose Fulbright – January 2016

01 | The regulator In addition, a company holding > 50 per cent interest in

02 | Subsidiary/branch 05 | Minimum capital

Norton Rose Fulbright – January 2016 23

Certain types of core activities are permitted to be