Regulatory Scope & Validity of Unadmitted Insurance Contracts in Taiwan Involving Foreign Insurers Without Approval from the Taiwanese Regulator

Under Taiwanese law, a foreign insurance company may not commence business in Taiwan unless it has obtained approval from the competent authority, completed the incorporation and registration procedures, deposited the required guarantee bond, and obtained a business license (Insurance Act, Article 137, Paragraph 3). In addition, any insurance policy intended to be marketed in Taiwan must be submitted to the Financial Supervisory Commission (“FSC”) for approval or filing before it can be officially issued.

However, due to the nature of insurance business and certain policy structures, it is not uncommon for a foreign insurer that has not been authorized to operate in Taiwan to nonetheless become involved in insurance contract relationships connected to Taiwan. Examples include a Taiwanese policyholder purchasing insurance from a foreign insurer through an insurance broker, or situations in which the insured or beneficiary under an insurance program is located in Taiwan. Because such contracts have not been approved or filed with the FSC, they may be considered “unadmitted insurance contracts.” In such circumstances, whether the FSC may deem the foreign insurer to be conducting insurance business in Taiwan without authorization—thereby triggering potential penalties—has drawn considerable attention.

The FSC’s general position is that “conducting insurance business in Taiwan” refers to engaging in core insurance activities within Taiwan, such as solicitation, underwriting, or contract execution. If the foreign insurer does not perform such activities in Taiwan, it would not be deemed in violation of the Insurance Act. However, if a foreign insurer engages in solicitation of insurance business in Taiwan without obtaining the required approval or registration, the competent authority may impose administrative sanctions under Article 166 of the Insurance Act, including an order to cease business and an administrative fine ranging from NT$3 million to NT$15 million.

Furthermore, any person who acts in Taiwan as an agent, broker, or solicitor for an unapproved foreign insurer will be subject to criminal liability. A corporate entity that employs such a person will also be subject to monetary penalties. These matters are governed by Article 167-1 of the Insurance Act, which provides:

A person who acts as an agent, broker, or solicitor for an insurance enterprise that is not an insurance enterprise under this Act or a foreign insurance enterprise—except for insurance procured from foreign insurers via insurance brokers in accordance with government policy as publicly announced by the competent authority—shall be subject to imprisonment of up to three years and/or a criminal fine between NT$3 million and NT$20 million. For serious violations, the competent authority may order insurance agents, brokers, notaries, or banks concurrently engaging in insurance agent or broker activities to suspend part or all of their business or revoke their licenses and cancel their registration certificates.

Where the representative, agent, employee, or other personnel of a legal entity commits the above offense in the course of its business, the legal entity shall be subject to the same monetary penalties in addition to the punishment imposed on the individual offender.

With respect to insurance contracts concluded with a foreign insurer that has not been approved to establish operations in Taiwan, Taiwanese court decisions generally do not consider such contracts automatically invalid; rather, they are treated as ordinary civil contracts. This approach is consistent with the fact that current Taiwanese laws do not expressly prohibit Taiwanese individuals from purchasing insurance, entering into contracts with foreign insurers, nor do they provide that such contracts are void.