TRADE POLICY REVIEW OF INDIA & IT’S TRADING PARTNERS- INSURANCE

SERVICES

CANADA

1. Under Canada's GATS commitments, commercial presence is required to offer insurance,

reinsurance, and retrocession services, except for marine insurance. A foreign company may incorporate
as a separately capitalized subsidiary, or a branch; it may also acquire an existing Canadian enterprise,
subject to notification and prior government review. A number of restrictions, including residency and
nationality requirements relating to broking and agency services have also been listed in Canada's GATS
Schedule. In general, Canada's revised services offer does not contain any new commitments in
insurance.1
2. There have been no major legislative changes affecting market access in the insurance sector
since Canada's last Review. In the context of the 2006 review of financial legislation, the Government
proposes to allow providers of marine insurance to register at the federal level, a possibility that is already
available to providers of all other insurance services.2

3. Under the Insurance Companies Act, foreign incorporated insurance companies cannot insure
risks in Canada unless the Superintendent issues an authorizing order.3 The Insurance Companies Act
lists the information that must accompany an application for an order4; the Superintendent is entitled to
request additional information. The application process involves a public notice requirement. The
foreign company must appoint a Canadian resident as its chief agent; it must appoint an actuary and an
auditor, and must have vested in trust assets having a prescribed value. Under the Act, the Superintendent
must publish in the Canada Gazette a quarterly list of foreign insurance companies authorized to carry on
business in Canada.

4. Under Part I of the Excise Tax Act, an excise tax of 10% is applicable on premiums paid to non-
established direct non-life insurers (except marine insurers) on risks within Canada, unless such insurance
is deemed not to be available in Canada.

5. There are no statutory restrictions on foreign ownership of federally registered insurance

companies. A person (Canadian or foreign) must obtain the approval of the Minister of Finance to
acquire more than 10% of any class of shares of a federally regulated insurance company.5 At least 35%
of the voting shares of federally registered insurance companies with equity of Can$1 billion or more
must be listed and posted for trading on an OSFI recognized exchange and be widely held. Mutual life
insurance companies that had equity in excess of Can$5 billion prior to their conversion into life
insurance companies with common shares (demutualization) in 1999-00 must be widely held. In
addition, there is a prohibition against any single person (Canadian or foreign) acquiring control of such
an insurance company, with some exceptions. The Guidelines Respecting Control in Fact (Insurance
Companies Act) set out the policy objectives and factors that the Minister of Finance would consider in
assessing whether an application to acquire more than 10% of the shares of a demutualized insurance
company would contravene the control prohibition. Two companies are subject to these rules.

6. The requirement in Quebec's "Loi sur les assurances" obliging non-residents of Canada to obtain
ministerial approval to acquire more than 30% of the voting shares of a Quebec chartered insurance
company was repealed in December 2002.
1
WTO document TN/S/O/CAN/Rev.1, 23 May 2005.
2
Department of Finance Canada (2006a).
3
Section 573(1).
4
Section 579(1).
5
Insurance Companies Act, Section 407(1).
7. Foreign companies may establish and operate in Canada through a subsidiary. There are no
restrictions on the number of insurance companies that can establish in Canada, except in areas subject to
a public monopoly, (i.e. motor vehicle insurance in British Columbia, Manitoba, and Saskatchewan, and
in Quebec, motor vehicle insurance with respect to personal injury and death. Subsidiaries of foreign
companies may offer the same services as domestic firms).

8. Foreign insurance firms may incorporate their Canadian subsidiary at the federal level or at the
provincial level. To incorporate federally and start operations, domestic insurance companies and
subsidiaries of foreign insurance companies must apply for letters patent of incorporation and an Order to
Commence and Carry on Business in a process analogous to establishing a bank.6 OSFI has published the
criteria and information requirements that must be fulfilled to establish and operate an insurance company
at the federal level.7 The information requirements largely mirror the criteria and information
requirements for banks. The application fee for letters patent of incorporation is Can$32,000. 8 The
minimum capital requirement for federally incorporated insurance companies (domestic or foreign) is
Can$5 million.9 At least half of the directors of a foreign-owned insurance subsidiary must be Canadian
residents; for domestic insurance companies, at least two thirds of the directors must reside in Canada.10
There have been 14 applications for letters patent of incorporation since 2003, two of which were
withdrawn.

9. Insurance companies must be licensed in each province where they do business. The Canadian
authorities have indicated that the licensing requirements across provinces are very similar in practice,
and that provincial efforts are under way to identify areas where harmonization can be promoted.11

10. Provinces maintain responsibility for regulation relating to the terms and conditions of insurance
contracts, rates, and standards of competence and behaviour of insurance agents and brokers. The
authorities indicated that all provinces except Quebec have adopted the Uniform Life Insurance Act, a
model law governing insurance contracts and beneficiary rights in the life and health insurance sector;
they also noted that Quebec's regulations in this area are very similar.

11. In general, only automobile insurance rates are subject to official controls.

INDIA

Insurance

Overview

The Insurance Regulatory and Development Authority (IRDA), established in 2000, is the insurance
sector regulator. Its functions include supervising the development of the sector, granting licences to
insurance intermediaries, and specifying the percentage of insurance business to be undertaken in rural
areas and the social sector.12
6
Insurance Companies Act, Sections 22 and 52.
7
OSFI (2004c).
8
Regulations Amending the Charges for Services Provided by the Office of the Superintendent of Financial
Institutions Regulations 2002.
9
Insurance Companies Act, Section 57(1).
10
Insurance Companies Act, Section 167(2).
11
WTO document WT/TPR/M/112/Add.1, 16 June 2003.
12
The "social sector" includes the "unorganized" sector, informal sector, economically vulnerable or
backward classes, and other categories of persons both in rural and urban areas.
Structural reforms include reducing government interference in the state-owned Life Insurance
Corporation (LIC), and General Insurance Corporation (GIC), both of which have dominant positions in
the industry.13 Competition from private domestic and foreign enterprises has also been promoted.
Currently, there are 16 life insurance companies (15 private and 1 public), 15 general insurance
companies (9 private and 6 public), and one reinsurance company. Increased competition has resulted in
rapid growth in the industry; between 2001/02 and 2005/06, the average annual growth rate of total life
insurance premiums was 27.8%, and the corresponding figure for general insurance was 16.5%. The
market share of private insurers increased from 12.6% in 2003/04 to 26.5% in 2005/06 for life insurers,
and from 14.5% to 26.3% for general insurers.

The insurance industry continues to be dominated by SOEs. The market shares of LIC and GIC, in life
and general insurance, although lower than in 2003/04 (87.4% and 85.5%, respectively), were still 73.5%
and 73.7%, respectively, in 2005/06. Competition in the industry is constrained by the relatively high
entry barriers: the minimum capital required to set up an insurance company is Rs 1 billion, and that for a
reinsurance company is Rs 2 billion. Foreign investment is restricted to 26% of total investment; an
amendment to increase the restriction to 49% is under consideration by the Government. Restrictions
also remain with regard to raising funds from NRIs, where only cash injections from shareholders are
permitted.

All insurance companies are required to maintain a solvency margin at a ratio of 1.5 (ratio of actual to the
required solvency margin).14 In 2004/05, 11 life insurance firms complied with the requirement
(including the LIC); in general insurance, two public-sector firms, and one private-sector firm, did not
comply.15

Further reform

The Tariff Advisory Committee under the IRDA determines premiums for fire, motor vehicle,
engineering, and workmen's compensation insurance; the insurance companies set premiums for all other
general insurance categories. The authorities consider that the current tariff regime is inconsistent with
increasing competition; hence, the Government notified plans to replace the system with a risk-based
rating system by 2007. Controls on tariff rates were to be removed on 1 January 2007; and from 31
March 2008, terms and conditions can be negotiated between companies and their clients.

In 2005, the penetration rate as a percentage of GDP was low, at 2.53% for life insurance and 0.62% for
general insurance. Penetration in rural areas is particularly low; thus, in 2003, the Government set up a
working group on micro-insurance to increase the penetration of insurance in rural areas, by, for example,
allowing cross-selling of insurance products between life and general insurance companies. Other
measures to increase rural insurance coverage include a National Agriculture Insurance Scheme (NAIS),
operated by the Agriculture Insurance Company of India. Subsidized by the Government, the NAIS
requires insurance companies to provide a certain percentage of their business to rural and socially
backward sections of society.16

13
The Government has signed "statements of intent" (SOIs) with companies, containing quantitative and
qualitative parameters, with which the performance of these companies would be monitored.
14
IRDA (2005). The solvency margin required for life insurers is Rs 500 million and a sum based on a
formula given in the IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations 2000. The required
solvency margin for general insurers is the highest of: Rs 500 million (Rs 1 billion for reinsurers); 20% of net
premium income; or 30% net incurred claims.
15
IRDA (2005).
16
The requirement is based on the IRDA Obligations of Insurers to Rural Social Sector Regulation 2002.
The authorities state that the regulation is currently under review.
Increased penetration is also pursued in health insurance, which covers only 1% of the population.
Currently, the health insurance industry is dominated by charitable institutions and government agencies,
which provide insurance services free of charge, as well as family-run businesses. To increase the
coverage of health insurance, the IRDA launched a Universal Health Insurance Scheme (UHIS), with
subsidies provided by the Government. The UHIS was modified in July 2004, and was restricted to
families below the poverty line (BPL).17 A health insurance working group was also established to
examine the promotion and development of health insurance. Furthermore, a committee established under
the IRDA made several recommendations on issues related to, inter alia, minimum capital requirements,
risk-based price setting, and restrictions on foreign investment.18

AUSTRALIA

Insurance

1. On 30 June 2006 there were 35 life insurance companies operating in Australia, with assets worth
$A 226.5 billion and receiving $A 40.1 billion in premium income for 2005/06. The life insurance sector
is relatively concentrated; as at 31 December 2005, the top three groups accounted for 60% of total
industry assets, and the top ten represented 92% of total assets.19 Foreign-owned companies accounted
for 29% of total life insurance assets.

2. Life insurance companies are supervised by APRA under the Life Insurance Act 1995. Australia
has no public life insurers. Superannuation business has the largest share of life insurance companies'
assets, accounting for 89% as at 30 June 2006, and around 90% of premiums in 2005/06. Around 22% of
all superannuation assets are held in life insurance policies as at 30 June 2006.

3. As at December 2005, there were 133 private general insurers in Australia, of which 112 are
direct insurers and 21 are reinsurers. They are prudentially supervised by APRA under the Insurance Act
1973. The general insurance sector is also highly concentrated, with the top three groups accounting for
45% of total industry assets, and the top ten representing 61% of total assets. 20 There are also 14 public
general insurers in Australia: not subject to the Insurance Act nor regulated by APRA, they are regulated
by state level legislation.

4. Non-resident life insurers must be subsidiaries of foreign companies.21 Australia's GATS

commitments also specify that sub-national guarantees may be provided by some state and territory
insurance offices.22

17
Under the revised UHIS, Rs 200 per year is provided for an individual, Rs 300 for a family of five, and
Rs 400 for a family of seven. By end-November 2006, public-sector companies had issued 46,464 policies,
covering 63,935 families and 201,090 individuals.
18
The Committee recommendation to reduce the capital requirement for exclusive health insurers to
Rs 0.50 billion is under consideration by the Government.
19
APRA online information. Viewed at: http://www.apra.gov.au/Statistics/Life-Insurance-Market-
Statistics.cfm [21 June 2006].
20
APRA online information. Viewed at: http://www.apra.gov.au/Statistics/loader.cfm?url=/
commonspot/security/getfile.cfm&PageID=12009 [3 August 2006].
21
WTO document TN/S/O/AUS/Rev.1, 31 May 2005, and Life Insurance Act 1995, Section 16ZE.
22
WTO document TN/S/O/AUS/Rev.1, 31 May 2005.
5. APRA is strengthening its prudential requirements for general insurance companies, with a view
to providing a clearer picture of reinsurance contracts. Under the new requirements, reinsurance
arrangements must be disclosed to APRA annually, and prior approval must be sought for limited risk
transfer arrangements (financial reinsurance). From 1 October 2006, general insurers supervised by the
APRA must comply with the new requirements, to provide a business plan confirming their ability to
meet future capital requirements, and an annual declaration of financial information by senior
management.

BRAZIL

Insurance

Insurance activities account for an estimated 3.3% of GDP. The total market value of premiums,
investment plan income, and receipts from open private pension contributions was around R$84.2 billion
(some US$50 billion) in 2007.23 Total premiums were R$66.5 billion in December 2007, 59.6% for life
and health insurance, 25.3% for motor vehicle insurance, and the rest for fire, transportation, and other
risks. In July 2008, there were some 131 insurance companies (of which 14 health insurance companies).
There were also 17 investment plan companies, and 29 open private pension fund societies in operation.

The situation of the Brazilian reinsurance market changed substantially during the review period. There
are currently 21 reinsurance companies operating (August 2008), three local, ten as admitted and eight as
occasional; all received authorization to operate in 2008.24 Until 2007, IRB-Brasil Resseguros remained
the sole provider of reinsurance in Brazil.

The Brazilian national insurance system (SNSP) is composed of the National Council of Private
Insurance (CNSP), the Superintendence of Private Insurance (SUSEP), the Brazilian Reinsurance Institute
(IRB BRASIL Re), private insurance companies, and authorized brokers. The CNSP is the main body
responsible for setting policies for the private insurance industry, including fixing the characteristics of
the different insurance contracts, and for the regulation of the national insurance system. SUSEP, an
autonomous body under the organizational structure of the Ministry of Finance, has responsibility for the
control and supervision of insurance, reinsurance, open private pension funds, and capitalization
(investment plans) operations. SUSEP executes the CNSP policies. Supervision of the health insurance
business is the responsibility of the National Health Agency (ANS), under the organizational chart of the
Ministry of Health.

The provision of insurance services in Brazil is governed by Decree Law No. 73 of 21 November 1966,
as modified by Decree No. 60,459 of 13 March 1967, Law No. 261 of 28 February 1967, Law No. 10,190
of 14 February 2001, Supplementary Law No. 109 of 29 May 2001, and Supplementary Law No. 126 of
15 January 2007. CNSP Resolutions and SUSEP Circulars regulate the industry's day-to-day activities.
Insurance companies that provide only health insurance are subject to ANS regulations.

23
National Federation of Insurance Services Providers (FENASEG) online information. Viewed at:
http://www.fenaseg.org.br/.
24
SUSEP online information. Viewed at: https://www.susep.gov.br/menuatendimento/resseguros/
resseguradoras.asp.
Supplementary Law No. 126 of 15 January 2007, contains provisions on reinsurance, co-insurance
operations, cross-border supply of insurance services, and operations in foreign currency. 25 This Law
amended Brazilian legislation to allow for insurance and reinsurance operations to be conducted in
foreign currency. While risks that take place in Brazil must be insured domestically, the Law provides for
a few exceptions, allowing the taking out of insurance abroad by natural persons or legal persons resident
in Brazil to: cover risks for which there is no provision of insurance in Brazil, provided that this
represents no violation of existing legislation; cover risks abroad where the insured is a natural person
resident in Brazil, for which the term of the insurance contract is limited exclusively to the period in
which the insured person is abroad; insurance policies that are the subject of international agreements
ratified by the National Congress; and insurance contracted abroad before the date of publication of the
Supplementary Law. The law allows Brazilian legal persons to take out insurance abroad to cover risks
abroad, provided this is notified to the SUSEP.

Prior to Supplementary Law No. 126, cross-border supply of insurance services was not allowed, except
if coverage was not available in the country and with prior IRB authorization, if covering the risk
domestically was deemed not convenient to the national interest, or if the insurance was for vessels with
Special Brazilian Registry (REB), provided the price of the premium was lower outside Brazil.

Insurance companies may not engage in other financial activities. They do not need to specialize in a
specific line of insurance and may be composite (life and non-life); the only exceptions apply to export
credit insurance, which must be specialized; life insurance companies authorized to deal in open pension
funds; health insurance companies; and reinsurance companies. Foreign insurance companies providing
insurance of any kind, except reinsurance, are required to be incorporated under Brazilian law, in the form
of a corporation.26

Establishment of a foreign life or non-life insurance company requires prior approval from SUSEP,
followed by a Minister of Finance Act. Authorizations to operate are granted directly by SUSEP. Once a
foreign company is authorized to operate in Brazil, national treatment is granted.

In accordance with Resolution CNSP No. 73/2002, amended by Resolution CNSP No. 178/2007,
minimum capital requirements vary according to the region of operation, the company's internal risk
management model, and the type of activity.27 There are no barriers to the internal trade of insurance
services as long as a company complies with these minimum capital requirements.28

Insurance brokers must be registered at the SUSEP. Pre-approval is required only for brokers wishing to
sell non-life insurance. The SUSEP may forbid the commercialization of any product considered
incompatible with the industry's regulatory framework or specific provisions thereof, or deemed to be not
technically feasible or badly structured. Life insurance products that offer long-term savings and
annuities, capitalization plans, and open pension products require prior approval from the SUSEP; other
new insurance products do not need pre-approval by the SUSEP, but must be notified.

Supplementary Law No. 126 of 15 January 2007 brought in significant changes to the reinsurance
business, opening the subsector to private, including foreign-owned and based re-insurance companies. In
accordance with this Law, reinsurance and retrocession can be held with a local reinsurer (established as a

25
SUSEP online information. Viewed at: https://www.susep.gov.br/textos/LC126-2007.pdf.
26
WTO document GATS/SC/13 /Suppl.3, 26 February 1998.
27
Insurance companies must maintain not less than R$1.2 million in fixed capital, plus a variable amount
up to R$6 million if they intend to operate in the whole country (a total of R$7.2 million or US$4 million).
Investment plans must maintain R$1.8 million, and R$10.8 million (US$6 million), respectively. For details, see
SUSEP online information. Viewed at: http://www.susep.gov.br/menumercado/ capitalmin.asp.
28
SUSEP online information. Viewed at: http://www.susep.gov.br/menumercado/capitalmin.asp.
corporation, with the sole object of conducting operations of reinsurance and retrocession); an admitted
re-insurer (based abroad, with a representative office in Brazil, registered in SUSEP to carry out
reinsurance and retrocession); or an eventual re-insurer (foreign reinsurance company based abroad
without a representative office in Brazil, also registered as such in SUSEP).

SOUTH AFRICA

Insurance

12. In 2001, there were 63 long-term insurance companies (such as life, home, industrial, and funeral
businesses) in South Africa, and 89 short-term (including fire, motor, and personal accident), up from 52
and 62, respectively, in 1997. Contractual savings institutions, which comprise pension funds and life
insurance companies, mobilize resources in excess of 120% of the GDP in 2000.29 Life insurance
companies are particularly large by international standards, and are properly funded and capitalized.30 Life
companies are linked to group pension plans, but there is also a large subsector of company-based
pension plans. Short-term insurance business is less developed.

13. The Financial Services Board (FSB), an independent institution established under the 1990
Financial Services Board Act, regulates and supervises the financial markets, as well as non-bank
institutions, which must register with it. Registration criteria have not changed since the last Review. Any
person, whether South African or foreigner, may control an insurance company in South Africa.
However, foreign insurers cannot open branches in South Africa, but may register subsidiaries.

NEW ZEALAND

Insurance

1. The insurance sector in New Zealand comprises life insurance and general insurance. The former is
quite concentrated with the three largest insurers controlling over 57% of the market (based on premium
income) in 2008, down from 61% in 2003. The five largest life insurance companies are foreign owned.
Premium income from life insurance was NZ$1.51 billion in 2008, compared with NZ$1.05 billion in
2003.

2. In December 2007, the New Zealand Cabinet approved proposals for the prudential regulation and
supervision of the insurance sector. The RBNZ is to be the prudential regulator and supervisor.
Legislation to give effect to the prudential requirements is expected to be promulgated in 2009 and
implemented in 2010.31 The insurance sector is to be regulated in much the same way as the banking

29
IMF (2001).
30
South African insurers receive some 80% of all premiums paid in Africa in terms of life insurance (IMF,
2001).
31
Previously, New Zealand's insurance industry was not subject to day-to-day control by a regulator.
Regulation of the industry was conducted through a combination of loose government supervision coupled with self-
regulation (for more details see WTO, 2003).
sector, with emphasis on corporate self-discipline, director responsibility, and published financial
statements.32

3. The objective of the new regulatory framework is "to encourage the maintenance of a sound and
efficient insurance sector that promotes policyholder confidence". Under the new prudential requirement:
the RBNZ will be the licensing and de-licensing authority; it will also prescribe and enforce insurer
compliance with regulatory requirements such as financial strength rating and disclosure requirements;
and intervene in a situation of distress or potential failure of an insurer.33

4. Under the new regulation, in order to be licensed in New Zealand insurers (domestic and foreign
owned) will: require minimum capital of NZ$2 million; have to meet New Zealand actuarial standards;
require financial strength ratings, from an approved ratings agency; and will not be permitted to
undertake any non-insurance business activities beyond a certain level.

5. Furthermore, all life insurers operating in New Zealand will be required to separate life insurance
from general insurance. In this regard, insurers will have to establish at least one life insurance statutory
fund to legally separate and better protect life insurance policyholder interests. In addition, connected-
party exposures in excess of an agreed threshold will not be permitted in calculations of an insurer's
solvency, thereby limiting the potential risks associated with an insurer lending to or investing in
connected parties.

Foreign insurers

1. Foreign-owned insurers can operate as branches in New Zealand, provided all licensing, monitoring,
and other prudential requirements are met. However, if foreign insurers are fully compliant with their
home-country regulator's prudential requirements, the RBNZ will have discretion to accept compliance
with these requirements and exempt these insurers from certain aspects of New Zealand's requirements.

EUROPEAN UNION

Insurance

14. In 2007, there were around 5,300 insurance companies in the EC (some 5,000 in 2004), with 1.3
million people employed in the insurance and pension fund subsector. 34 Insurance firms wrote €1,122
billion of gross premiums in 2007 (excluding reinsurance), up from €764 billion in 2001, making the EC

32
Risk-based monitoring will be primarily off-site, using publicly available information and regular returns
provided by insurers, and will focus on insurers who might be carrying too much risk or insufficient capital.
33
The RBNZ will have available a range of crisis response actions including the appointment of
investigators, giving directions to the insurer, requiring the insurer to prepare a recovery plan, and de-licensing the
insurer in extreme circumstances.
34
Classification of Economic Activities in the EC (NACE) Division 66 of Eurostat.
insurance market the largest in the world, followed by the United States and Japan.35 Life and non-life
insurance represented 68% and 32%, respectively, of total direct gross premiums in 2007. 36 On a per
capita basis, average spending on life insurance is highest in the United Kingdom; average spending is
more uniform in the non-life area. Total assets under management by insurance corporations rose from
€5,736 billion in 2003 to €6,960 billion in 2007, while total assets under management by investment
funds increased from €3,921 billion to €6,780 billion over the same period (Table IV.17).

15. The EC insurance market is partly integrated: consumers and smaller businesses are generally
confined within their national market, and therefore would benefit from more competition; while on the
supply side, large insurance companies, in some cases belonging to pan-European groups, compete at a
multi-domestic level. In life insurance, the average market share of the five largest insurance groups was
54.7% in 2005 (43.9% in 1995); non-life insurance is slightly less concentrated with the five-firm market
share at 52.4%.37 EC insurance companies are substantially more internationally oriented than banks, with
ten out of the top fifteen insurance groups earning most of their premiums in foreign countries.38
Moreover, EC reinsurance companies had 46% share of the global market (in terms of gross reinsurance
premiums) in 2005. Life insurance products are mostly distributed via "bancassurance" networks, while
non-life products are largely distributed via agents and brokers.
Table IV.17

Total assets under management by insurance corporations and by investment funds, 2003-07

(€ billion)

Total assets under management by Total assets under management by investment

insurance corporations funds

2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

EC-27 5,736 6,217 7,130 7,591 6,960 3,921 4,435 5,580 6,488 6,780

Euro area 3,263 3,542 3,915 3,922 3,718 3,421 3,832 4,791 5,550 5,779

Austria 64 68 77 83 88 109 123 153 166 161

Belgium 140 164 185 202 .. 84 95 110 124 118

Bulgaria .. 0.3 0.4 0.6 0.8 .. .. .. .. 0.5

Cyprus 4 4 5 .. .. 0.5 0.4 0.7 1 1

Czech Republic 7 8 10 10 11 3 4 5 3 4

Denmark 108 124 146 153 163 49 77 107 124 137

Estonia 0.2 0.3 0.5 0.6 0.8 0.2 0.3 0.6 1 1

Finland 42 44 50 52 57 15 22 33 46 49

35
The insurance subsector of many new Member States is underdeveloped in terms of premium per
capita, but the demand for insurance products is expected to raise during the integration process.
36
The aggregate return on equity for life was 14.7% in 2005 (almost unchanged since 2004), while
the return on equity for non-life increased from 11.9% in 2004 to 13.1% in 2005 (European Commission, 2007d).
37
There are wide differences among Member States in terms of concentration, with the five largest
insurance groups in smaller markets, such as the Baltic countries, having a share of more than 85% (European
Commission, 2007d).
38
However, the relative importance of cross-border mergers and acquisitions has fallen recently,
which may explain why the consolidation process has been accompanied by a falling market share of foreign
companies.
 France 946 1,029 1,152 1,281 1,357 703 799 943 1,156 1,201

Germany 1,060 1,092 1,139 1,023 1,018 827 862 975 1,029 1,054

Greece 10 11 15 18 19 14 16 22 17 13

Hungary 4 5 6 7 9 3 3 5 7 9

Ireland 74 92 121 .. .. 225 282 394 482 516

Italy 384 445 508 575 531 319 321 350 341 291

Latvia 0.2 0.2 0.3 0.3 0.5 0.04 0.05 0.09 0.08 0.2

Lithuania 0.4 0.4 0.5 0.8 0.9 0 0.04 0.1 0.2 0.3

Luxembourg 33 40 50 61 .. 818 975 1,426 1,726 1,933

Malta 0.6 0.8 1 1 1 0.8 1 1 1 1

Netherlands 294 316 345 332 342 97 98 105 114 100

Poland 12 17 21 26 33 7 9 16 26 37

Portugal 32 36 43 49 53 28 31 37 41 40

Romania 0.5 0.6 1 1 2 0.6 1 2 3 4

Slovakia 2 2 3 4 5 .. 0.1 2 2 2

Slovenia 2 2 3 3 4 1 2 2 3 4

Spain 182 204 228 243 249 179 208 240 306 298

Sweden 195 214 240 267 276 93 117 145 161 165

United 609 637

2,139 2,296 2,780 3,196 2,740 342 389 505
Kingdom

.. Not available.

Source: ECB (2008), EU Banking Structures, October 2008, Frankfurt.

16. Insurance undertakings have also benefited from the single passport since 1994. The EC has two
objectives in the subsector: to provide all EC citizens with access to the widest possible range of
insurance products on offer in the EC, while guaranteeing them the legal and financial protection
required; and to guarantee that an insurance company authorized to operate in any of the Member States
can pursue its activities throughout the EC, in terms of the rights to establish and to supply services. In
order to achieve these objectives, the EC has dealt with life insurance and non-life insurance separately to
take account of their specific characteristics. In addition, it has separate legislation on specific areas:
motor-vehicle liability insurance, annual accounts and consolidated accounts of insurance undertakings,
legal protection insurance, and credit and suretyship insurance.39
17. The key legislative development in the subsector during the review period was the adoption, in
July 2007, of the Insurance Solvency II project, which aims to overhaul EC regulation and supervision, in
order to bring it more into line with international developments in supervision and financial reporting,
including Basel II rules for banks. Risk-based calculations of the solvency requirements for insurance
undertakings are to be introduced, and calculation of insurance liabilities (technical provisions) will be

39
See European Commission online information. Viewed at:
http://ec.europa.eu/internal_market/insu
rance/index_en.htm.
harmonized, while fostering the convergence of supervisory practices. The Commission aims to have
Solvency II in operation in 2012.40

18. The EC Insurance Directives rules regarding third country insurance undertakings cover only the
establishment of branches and agencies in the EC. The freedom to provide services in third countries is
not regulated at EC level. Matters not dealt with in EC legislation remain within the competence of the
Member States, subject to the general provisions of the EC Treaty. The EC Directives specifically
prohibit Member States from introducing price controls, i.e. Member States are not allowed to require
prior approval or systematic notification of policy conditions in their national provisions.

SWITZERLAND

Insurance

With the world's highest average per capita premium volume (over Sw F 7,000 per year), Switzerland
benefits from an unusually high degree of insurance cover taken on by national consumers, while
internationally the industry is particularly strong in the field of reinsurance. As at June 2008, there were
213 companies offering insurance services: 117 non-life insurers (78 Swiss, 39 foreign), 26 companies
offering life-insurance (22 Swiss, 4 foreign); 26 reinsurance companies; and 44 captives (self-insurers).

Insurance activities in Switzerland are governed by the Insurance Surveillance Law (LSA, RS 961.01),
the Insurance Contract Law (LTA, RS 221.229.1), and complementary ordinances. Revisions of both
laws entered into force in January 2006 with a view to strengthening solvency requirements and
improving consumer protection and insurance supervision. The Federal Office of Private Insurance
(FOPI) is responsible for supervision of the insurance subsector (with the exception of compulsory health
and accident insurance); this task will be taken over by the FINMA in January 2009. The supervision of
compulsory social insurance is under the responsibility of the Federal Social Insurance Office (FSIO),
while SECO is in charge of supervising the unemployment insurance, and the Swiss Federal Office of
Public Health is responsible for supervising all matters concerning sickness and accident insurance.

Insurers with their principal office in Switzerland require approval by FOPI before commencing business;
foreign companies whose only business in Switzerland is reinsurance are exempted and are not subject to
FOPI supervision; these companies are supervised by their respective home country jurisdiction. Each
class of insurance activity requires separate approval. Composite life, non-life, and non-insurance-related
operations are not allowed. There is a public monopoly on fire and natural damage insurance (on
buildings) in 19 cantons. As part of its social security system, Switzerland maintains a monopoly on
accident and occupational disease insurance in certain categories of industries exposed to higher risks,
such as construction, forestry, and certain transportation services.41

40
Under Solvency II, insurers would be required to take account of all types of risk to which they
are exposed and to manage those risks more effectively. Insurance groups would have a dedicated "group
supervisor" that would enable better monitoring of the group as a whole.
41
The Federal Law on accident insurance (RS 832.20) is the legal foundation for the national workplace
accident insurance.
Minimum fully paid-up capital requirements range from Sw F 3 million to Sw F 8 million for non-life
insurers; from Sw F 5 to 12 million for life insurers; and from Sw F 3 million to Sw F 10 million for
reinsurance companies. Minimum capital requirements are based on the class with the highest risk
amount. Foreign-owned insurance companies must have a representative with residence in Switzerland;
this can be either a board member or a director. To cover costs and losses in the initial years of operation,
an organizational asset fund must be formed, equal to between 20% and 50% of minimum capital, and
available at short notice. Furthermore, class-specific levels of reserves must be available.42

As a general rule, cross-border supply of insurance services is not allowed. However, cross-border
supply is allowed for risks related to international transport, war, and any risk located outside
Switzerland. Representative offices may not engage in business or act as agents. Foreign insurers
establishing in Switzerland must have been in operation for at least three years. The manager of a foreign
insurance company must be domiciled in Switzerland and, apart from the organizational fund, the branch
must have unrestricted access to assets equal to 50% (for non-life insurance) or 100% (for life insurers) of
its minimum guarantee fund.

The 1989 bilateral agreement granting EC non-life insurers the right of establishment in Switzerland (on a
reciprocal basis) has made their regulations somewhat less restrictive than for non-EC companies. In
particular, in contrast with other foreign non-life insurers, EC non-life insurers are not required to deposit
part of their assets with the SNB. Cooperation between the supervision authorities of Switzerland and
Liechtenstein is regulated by a bilateral agreement on direct insurance and insurance brokerage.43

Basic sickness and health insurance is compulsory for all residents and can be provided by either
recognized non-profit health organizations or private insurance companies; it covers sickness, maternity
and accident (if not covered by accident and occupational sickness insurance). 44 Optional insurance may
also be purchased, but this falls under private insurance law. All insurers offering the basic sickness
insurance scheme are obliged to provide identical services, which are defined by law as "effective,
appropriate, and efficient"; apart from pharmaceuticals, there is no specific list of benefits for insured
persons. Each person may freely choose any health insurer; the latter must not refuse insurance or
impose any reservations or qualifying period.45 Under the Sickness Insurance Act, insurance companies
must offer a uniform premium within each canton, without consideration of the age of new insured
entrants. The insurer may only distinguish three categories of premiums within the canton and allow
reduced premiums to children and young people in education (between 18 and 25 years). Under the Act,
the Confederation and the cantons subsidize sickness insurance premiums for persons with low income.
The financial contribution from the Confederation is allocated to the cantons according to their
population, their respective financial capacities, and the amount of the premiums. The federal
contribution corresponds to 7.5% of the gross cost of the compulsory sickness insurance. All other
complementary insurance services are regulated by private laws under the Insurance Contract Law. In
order to participate in the basic sickness insurance scheme, sickness insurance suppliers must be
organized as an association, mutual association, foundation or joint-stock company without a commercial
objective.

Social security consists of old age and surviving spouse pension, disability insurance, unemployment
insurance, and loss of earnings benefit and workplace accident and occupational sickness insurance.

42
WTO document GATS/SC/83/Suppl.4.
43
RS 0.961.514.
44
Foreign insurance companies are allowed to invest in real estate up to the value of technical reserves
required.
45
Compulsory health insurance is based on the Federal law on health insurance of 18 March 1994, in force
from 1 January 1996.
There are three pillars: the old-age and surviving spouse, and disability insurance46, a highly
redistributive public scheme, which is compulsory for all persons living or working in Switzerland; an
occupational pension scheme that is compulsory for employees with an annual income exceeding Sw F
19,89047 and optional for self-employed persons (it is designed to enable the insured to maintain current
living standards after retirement); and a third pillar consisting of individual savings. Premiums are set by
law. Life insurance dominates the provision of old-age pensions under the second pillar of the pension
system (obligatory private provision) and the third pillar (voluntary old-age savings).

Insurance services are exempt from VAT. A withholding tax of 8% is levied on settlements from life
insurance or 15% on private annuity insurance. The insurance premiums tax is a stamp duty levied on
certain insurance premiums at a standard rate of 5%; life insurance premiums are taxed at a reduced rate
of 2.5%.

JAPAN

Insurance
2. Japan's insurance market comprises three subsectors: non-life, life, and the "third sector", which
includes accident and health care insurance. The authorities maintain that there are no state-owned
insurance companies in Japan. The Nippon Export and Investment Insurance is an independent
administrative institution that provides trade insurance; the authorities maintain that this is based on the
terms and conditions of the OECD Arrangement on export credits to mitigate risks not covered by other
private insurers. The Japan Post Insurance Co. Ltd is fully owned by the Japan Post Holdings, a fully
state-owned holding company.
3. Japan's insurance sector has undergone further changes since 2007; three life-insurance and four non-
life insurance companies have been established, partly through merger deals and privatization. At the end
of September 2007, the top four life insurance companies accounted for 60.6% of total life insurance
company assets; and the top eight non-life insurance companies held 90.3% of the non-life total.
4. The Financial Services Agency is the main authority regulating insurance, in accordance with the
Insurance Business Law (IBL), the main law governing the sector. A licence from the Prime Minister is
required to conduct insurance business in Japan; approval is required for new insurance products, for
modifications to existing products, and for premium rates. Life and non-life insurance companies may
enter each other's markets only by means of subsidiaries. Commercial presence, licensed by the Prime
Minister, is normally required in order to offer insurance services in Japan except, inter alia, for certain
reinsurance, commercial aviation insurance, and international marine hull insurance. 48 The criteria for
granting licences and the requirement of solvency margins are the same for Japanese and foreign
insurance providers. The Ministry of Finance and the Financial Services Agency are responsible, inter
alia, for the management of the Deposit Insurance Corporation, and other public insurance schemes for
deposits and investment.

46
Assurance-vieillesse et survivants/Assurance-invalidité, AVS/AI.
47
The threshold was reduced from Sw F 25,320 in January 2005 to Sw F 19,350 in January 2006.
48
For other insurance contracts, prior approval is required for foreign insurers without commercial presence
in Japan.
5. For the purpose of broadening sales channels of financial products and services, the Government of
Japan: lifted the ban on bank agent business by insurance companies 49; clarified that insurance
companies are allowed to do "business matching"50, and to introduced clients to securities companies51;
permitted banks to sell all insurance products (amendment of Ordinance for Enforcement of Insurance
business Law, in December 2007); and lifted the ban on insurance companies engaging in agent business
for trust contracts, investment advisory contracts, and discretionary investment management contracts. 52
The amendment to the IBL to establish a regulatory framework for unregulated kyosai entered into force
fully on 1 April 2008, upon the expiry of a two-year transitional period.53
6. As the result of corporatization of Japan Post, the Japan Post Life Insurance began operations in
October 2007; all shares in the new company are held by the Japan Post Holdings, whose shares are all
held by the Government. The Japan Post Life Insurance provides life insurance services under the same
regulations applied to other private insurance companies under the Insurance Business Act, except that it
faces various constraints, such as limited insurance amount per policy holder, limited product variety, and
restrictions on investment during the transition period (2007-17) (Chapter I(3)(ii)). The Japan Post
Insurance is subject to the same corporate taxes as other insurance companies.

MEXICO

Insurance

7. Mexico's insurance sector comprises insurance companies and mutual institutions. Although
insurance penetration54 is only 1.9 per cent of GDP (beginning of 2007), Mexico is the second largest
insurance market in Latin America, with 25 per cent of total premiums.

8. Over the period 2002-06, the value of direct premiums averaged some 137,238 billion pesos, life
insurance accounting for 38.9 per cent of this figure, pensions for 4.0 per cent, accidents and illness for
13.2 per cent, and damages for 43.9 per cent; in the meantime, the value of reinsurance premiums
averaged about 2,933 billion pesos.55 Key emerging niches include educational, transportation, and
natural hazard products.

9. As of December 2006, there were 91 insurance companies in Mexico; of the total, one was a mutual
insurance company and one a State-owned company, while the remaining 89 were private insurance
companies. Three foreign and two Mexican insurance companies comprise nearly 60 per cent of the
market.

49
Based on an amendment to the Ordinance for Enforcement of Insurance Business Law (April 2007).
50
Business matching in this context relates to an insurance company's provision of information concerning
expertise of its clients to other clients, for the purpose of creating business opportunities.
51
Based on an amendment to the "Guideline of overall supervision for insurance companies" (June 2007).
Viewed at: http://www.fsa.go.jp/common/law/index.html.
52
Based on an amendment of the Ordinance for Enforcement of Insurance Business Law (March 2008). In
2006, Japan lifted the ban on agent business by insurance companies for trust contracts.
53
The scope of the law was widened to cover businesses that underwrite insurance for a specified group of
persons; registration requirements were imposed on businesses of a limited scale that underwrite small amounts of
short-term insurance. Where the authorities consider appropriate, the regulatory framework is set to be reviewed
five years after its implementation.
54
Total value of insurance premiums as a percentage of GDP.
55
Figures for 2006 reported as of September. National Insurance and Bonding Commission (several years);
National Insurance and Bonding Commission (2007a); and National Insurance and Bonding Commission (2007b).
10. The insurance industry is governed by the General Law on Insurance Institutions and Mutual
Societies (LGISMS) of 1935 and amendments thereto. The SHCP is mainly in charge of granting
authorizations to insurance companies to operate in the country, while the CNSF is a supervisory body.

11. Companies seeking to obtain an insurance licence must meet the requirements set forth in the
LGISMS. This Law states that, depending on the origin of the shareholders who subscribe their capital,
insurance institutions may be either wholly or majority Mexican-owned or wholly or majority foreign-
owned, in which case they are treated as a subsidiary of a financial institution from abroad.

12. In the case of institutions the majority of whose capital is Mexican-owned, foreign natural and legal
persons may (with some exceptions) acquire shares representing the insurers' capital but the Mexican
investment must retain the power to determine the management and effective control of the institution.
According to the Law, effective control may be obtained by acquiring 30 per cent or more of the shares
representing the paid-up capital of an institution, controlling the annual meeting, being able to appoint a
majority of the members of the board of directors, or by exercising some other means of control.

13. In the case of insurers the majority of whose capital is foreign-owned, the foreign institution must
come from a country with which Mexico has signed a free trade agreement that includes a financial
services chapter. These foreign institutions must establish themselves in Mexico through subsidiaries.

14. In addition to meeting the above requirements, subsidiaries must also comply with the Rules for the
Establishment of Subsidiaries of Financial Institutions from Abroad. These requirements include the
ownership structure, operating and internal controls, financial projections and fitness of directors and
senior management.

15. The LGISMS forbids hiring insurance services from companies established abroad when the risk is
located in Mexico. Exceptions are granted when the insurable risk is not insured by companies operating
in the country, and the insured has received due authorization from SHCP to hire a foreign company to
provide the service directly or through an insurance company established in Mexico. Transfer of non-life
or life insurance portfolios between insurance companies requires SHCP approval, which is given when
the requirements are met.

16. Where the hiring of reinsurance services is concerned, the LGISM allows an insurer established in
Mexico to sign a contract with reinsurers from abroad provided that the latter are enrolled in the General
Register of Foreign Reinsurers; enrolment depends on the discretionary approval of the SHCP.

17. Insurance companies do not require approval for the premiums they charge. However, they must
provide the CNSF with technical reports that lay out the criteria on which their premium calculations are
based.

SOUTH KOREA

(i) Insurance

(a) Structure

19. Korea has the second largest insurance sector in Asia, after Japan. The sector's assets amounted
to approximately 39% of GDP in 2007. There are 22 firms offering life insurance, including 8 foreign
firms. Total assets of firms in the subsector as of March 2007 were W 273 trillion. The life insurance
sector is dominated by the three largest firms, which collectively account for 72% of the sector's assets;
the largest, Samsung Life, is responsible for 40%. Although the share of foreign firms has been rising, it
is still less than 20% (17.5% in 2005). On the other hand, the non-life insurance sector is less
concentrated and much smaller, with W 57 trillion of assets. There are 29 non-life insurers, including 13
foreign firms. The largest, Samsung Fire and Marine, accounts for 32% of the sector's assets; the share
of foreign non-life insurers is less than 2%.

(b) Performance

20. Assets of life insurance firms rose from W 211.6 trillion in fiscal year 2004 (April 2004-March
2005) to W 273 trillion in fiscal year 2006, while assets of non-life insurance firms increased from W 44
trillion to over W 57 trillion over the same period.56 The rise in assets is due to a rise in premiums from
variable insurance policies. Despite rising premiums and assets, net income of insurance companies
declined slightly, due to increased operating expenses and higher mandatory reserve ratios for incurred
but unreported claims.

(c) Regulation

21. Under Korea's Insurance Business Act, the life and non-life sectors are strictly divided; life
insurers are banned from offering non-life products, and vice versa. There are no barriers to foreign
entry. Foreign branches must maintain funds of at least W 3 billion, if wanting to do business with both
Koreans and foreigners. The FSC has adopted the EU-based solvency margin ratio; insurance premiums
(both life and non-life) are set by the market.

22. Bancassurance (life and non-life insurance policies provided by banks and other financial
institutions) was introduced in August 2003, initially limited to designated branches; the proportion of
insurance policies sold from a single insurer has also been restricted. To ease the impact on existing
insurers, the scope of products open to bancassurance is to expand in three phases. The first phase, from
August 2003 to March 2005, opened the way for sales of long-term savings policies and personal pension
insurance policies. The second phase, from April 2005 to March 2008, opens the offering of casualty
insurance, long-term care insurance, and illness insurance. The rest of the insurance industry was to be
liberalized completely from April 2008, but this was suspended with the National Assembly's
concurrence. Under the amended law, bancassurance providers are required to make in-house sales,
outbound sales are prohibited, as are tie-in sales of bancassurance products by banks offering loans.

CHINA

(d) Insurance

18. At end 2008, there were 8 insurance groups and 112 insurance companies in China; 64 were
domestic companies (31 property insurance, 30 life insurance, and 3 reinsurance), and 48 foreign
companies (16 property insurance, 26 life insurance and 6 reinsurance). The Chinese insurance market
remains highly concentrated. According to official information, the three largest life insurance companies
held about 63% of market share in 2008, compared with 71.6% in 2006; the share of the three largest
non-life companies was about 64% in 2008, compared with 67.25% in 2006. The insurance premiums of
foreign insurance companies amounted to Y 39.12 billion, accounting for about 4% of the national market
56
Financial Supervisory Service (2007b).
share. The assets of foreign insurance companies at end 2008 totalled Y 152.24 billion, accounting for
4.5% of the total assets of the sector (up from 4.4% in 2001). Taking into consideration the foreign-
invested share in Chinese insurance companies, foreign insurance companies' total income accounted for
around 24%; 33 Chinese insurance companies have received foreign investment to date.

19. The insurance market is regulated by the China Insurance Regulatory Commission (CIRC). The main
legislation administering insurance services is the Insurance Law; its latest amendment entered into force
on 1 October 2009.57 Under the Law, all insurance companies providing insurance services in China must
be registered, and all legal persons (including natural persons) or organizations in China requiring
coverage in China must purchase insurance services from an insurance company registered and
established in China. Approval is required for forms and rates for products having a "bearing on the
interests of the public" (e.g. public security liability insurance products), compulsory insurance products,
and newly developed life insurance products. Forms and rates for all other products, must be submitted to
the regulatory authority just for the record. Furthermore, the Rules on the Administration of Insurance
Brokerage Institutions regulate insurance and reinsurance brokerage business and the Rules on the
Administration of Insurance Agency Institutions regulate insurance agencies. The Provisional
Regulations on the Administration of Insurance Asset Management Companies allow foreign and
domestic insurance companies to establish insurance asset management companies.

20. During the revision of the Insurance Law, the CIRC issued a notice in September 2008 to impose a
moratorium on establishing sales offices for insurance; in accordance with a newly amended Insurance
Law, the CIRC issued the Rules on Administration of Insurance Companies, which entered into force on
1 October 2009. The Rules aim to strengthen internal control of insurance companies' affiliates; the
supervision of sales offices is also subject to the Rules. Reinsurance business is covered by the
Regulations on the Administration of Reinsurance Business.

21. Insurers may engage in either property insurance (loss or damage to property, liability insurance, and
credit insurance) or personal insurance (including life, health, and accident and injury insurance); they
may not concurrently provide property and personal insurance services, although an insurance company
engaged in property insurance may, upon approval from the CIRC, provide short-term health and
accidental injury insurance. For establishing branches, there have been no changes to minimum
registered capital requirements, or other conditions, since China's previous Review. Foreign insurance
companies may enter the market as 100% foreign-owned subsidiaries for non-life insurance and up to
50% foreign owned for life insurance. The CIRC circular "Interpretation of Several Issues Concerning
the Application of the Measures for the Administration of Foreign Insurance Institutions' Representative
Offices in China", which entered into force in December 200858, clarifies certain conditions for the
establishment of representative offices by foreign insurance companies, including a minimum asset
requirement of US$2 billion. The circular is intended to strengthen supervision of representative offices
of foreign insurance companies in China.59

22. In order to establish an insurance asset company, non-life companies must have total assets of at least
Y 5 billion, while life insurance companies and insurance holding groups must have at least Y 10 billion,
and companies must have engaged in the insurance business in China for at least eight years.

57
WTO document S/C/W/309, 2 November 2009.
58
The establishment and operations of foreign insurance companies are governed by the Regulations on
Administration of Foreign-funded Insurance Companies, and the Detailed Rules for Implementation of Regulations
on Administration of Foreign-funded Insurance Companies. The authorities maintain that notices and rules issued
by the CIRC since 2008 mainly concern the CIRC’s supervision.
59
For details of supervision of domestic insurance companies, see the Rules on Administration of Insurance
Companies.
23. China Post Life Insurance Company Limited obtained CIRC approval to start preparatory work for
establishment in April 2008, and was established on 9 September 2009, with registered capital of Y 500
million. From a regulatory perspective, China Post Life Insurance is treated in the same way and under
the same laws and regulations as other insurance companies in China; the authorities maintain that China
Post Life Insurance does not enjoy any preferential treatment in regard to supervision standards. The new
company targets mainly farmers, low-income urban residents, and migrant workers in cities; it is subject
to enterprise income tax, like other insurance companies.

CHINESE TAIPEI

Insurance

24. At the end of 2009, the insurance industry accounted for 23.5% of the total assets of financial
institutions; most of which were held by life insurance companies (97%). As of November 2009, there
were 54 insurance companies. The life insurance sector included 22 domestic companies and 9 local
branches of non-Chinese-Taipei companies, while the non-life insurance industry comprised 17 local
firms and 6 non-Chinese-Taipei affiliates. There were also four reinsurance companies.60

25. In accordance with the Insurance Law, life insurance companies may not offer non-life insurance
services and vice versa, except where a non-life insurance enterprise is authorized by the competent
authority to engage in accident or health insurance. Insurance firms may not engage directly in banking.
However, any domestic or overseas insurance company registered in Chinese Taipei may sell insurance
products through banking channels, provided that it has obtained approval from the competent authority
to jointly promote insurance products or provide relevant services with a bank. Qualified insurers have
been allowed to engage in pension business since 2005.

26. In 2007 and 2008, the Insurance Law and related regulations were amended to respond to changing
market conditions and to strengthen supervision of the industry. Major changes included the expansion of
the scope of insurers business operations; for example, non-life insurers are now allowed to conduct
health insurance business, life insurers may now offer investment-linked insurance policies and policies
denominated in foreign currencies, and all insurers may participate in the domestic stocks and securities
markets and invest in a wide range of financial instruments. The limit on investment abroad by insurers
was raised from 35% to 45%. Other amendments were aimed at strengthening consumer protection and
increasing accountability and transparency.61 In addition, under the liberalization programme for non-life
insurance premiums, as of 2009 insurance companies are free to set the prices and contents of insurance
products.

27. The establishment of a commercial presence is necessary to access the Chinese Taipei insurance
market, except for reinsurance, maritime shipping, and commercial aviation insurance.62 Subject to
approval by the FSC, non-Chinese-Taipei firms may establish subsidiaries, branches, and representative
offices, and merge with or acquire local insurance companies. There are no restrictions on non-Chinese-
Taipei ownership. A NT$2 billion minimum paid-in capital requirement applies for the establishment of

60
FSC (2009).
61
An insurance firm organized as a company limited by shares is now required to issue its stock publicly,
unless another act provides otherwise or the Government has granted an exemption.
62
WTO document GATS/SCI/136/Rev.1, 2 July 2002.
domestic insurance companies and subsidiaries of non-Chinese-Taipei insurance firms. 63 There is no
additional working capital requirement for a domestic insurance company to set up a branch office.
Requirements for the establishment of a branch of a non-Chinese-Taipei insurance company are minimum
capital of NT$50 million, a record of sound performance in the firm's home market in the previous three
years, and no major violations in the previous three years.64 Non-Chinese-Taipei insurance firms may
conduct, separately, life, non-life, and reinsurance businesses. There is no difference in income tax
treatment on insurance premiums paid or payments received under life insurance policies issued by
domestic and overseas insurance companies established in Chinese Taipei.

28. Participation of non-Chinese-Taipei companies in the local insurance market remains limited: four
international insurance firms were operating at end 2008. One possible explanation for this limited
participation is that non-Chinese-Taipei insurance firms must report to their parent companies under
stringent standards (e.g. the International Financial Reporting Standards and Solvency II accounting
standards), whereas domestic insurers are subject to less stringent local regulatory requirements. This
situation may put non-Chinese-Taipei insurers at a disadvantage and, reportedly, it has led to two leading
international life insurance companies leaving the local market over the past two years.65 In the
authorities' view, however, the fact that subsidiaries and branches of non-Chinese-Taipei life insurance
firms accounted for 17.6% of first-year premium income for the first 11 months of 2009, demonstrates
that there are no obstacles to their growth in the local market. They have also indicated their plans to
adopt international reporting/accounting standards by 2013.

29. In order to keep pace with increasing economic relations with China and to meet the needs of
domestic insurance firms, since 2004 the FSC has allowed insurers to establish representative offices and
joint ventures in China, and to offer reinsurance there. As of January 2009, local insurers had received
approval to set up 38 representative offices and 4 joint ventures in China. In addition, Chinese Taipei is
considering the possibility of allowing its companies to invest in insurance funds in China's real estate
and financial markets.66

INDONESIA

(e) Insurance

23. The insurance industry is small in terms of premiums to GDP, at barely 2%, and total assets
equivalent to 3% of GDP. As of September 2005 there were 51 life insurance companies, 97 non-life and
4 reinsurance companies. In addition there were two companies to administer social security and three to
manage civil servants and armed forces insurance. The industry is heavily concentrated with the top five
non-life companies accounting for 51% of assets and the top five life insurance companies accounting for
55% of assets. The industry is not healthy financially; five insolvent non-life companies and six
insolvent life companies are still operating. Local insurers have struggled to meet the increasingly
rigorous solvency margin requirements enacted by the Finance Ministry since 1999. Foreign companies

63
Regulations for Establishment and Administration of Insurance Enterprises, promulgated on 9 January
2008.
64
Article 6 of the Regulations for the Establishment and Administration of Foreign Insurance Enterprises,
last amended on 23 February 2009. Viewed at: http://law.tii.org.tw/Eng/FLAWDAT01.asp?lsid= FL006769
[10 August 2009].
65
American Chamber of Commerce (2009); and European Chamber of Commerce (2009).
66
FSC (2008).
can hold up to an 80% stake in a local insurance company although the experience of certain foreign
companies in joint ventures has been problematic.67 With respect to commitments under the GATS, entry
limitations are accompanied by restrictions on foreign equity below the level of the status quo.

SINGAPORE

Insurance

The insurance sector continues to be regulated by the Insurance Act, 2002 (Cap. 142) and accompanying
regulations. The MAS is the regulatory authority68: to carry out insurance business in Singapore
registration with the MAS is required. In registering an insurer to write either life or general insurance
business, the Authority will specify the registration as being for direct insurance, reinsurance, or captive
insurance.69 Insurers registered to write both life and general insurance are known as composite insurers.
A direct insurer can undertake both direct and reinsurance business; however, a re-insurer is confined to
only reinsurance business. Insurers in Singapore are subject to prudential and market-conduct standards.
The authorities note that there is no difference in standards applied to domestic or foreign-owned
companies, whether they are locally incorporated or branches of foreign incorporated companies.

A risk-based supervision framework replaced the audit-based inspection framework in 2002, to

emphasize prevention. In November 2003, the Insurance Act was amended to provide the legal basis for
a risk-based capital framework, and a consultation paper on the proposed framework was issued. In
August 2004, the MAS implemented a new system designed to move the insurance sector to a risk-based
capital framework. The formula to calculate capital requirements takes into account both insurance risks
undertaken by an insurer and risks arising from the way it invests the premiums collected. Under the new
framework, the MAS may further adjust capital requirements to reflect risks that cannot necessarily be
quantified, such as operational risks. Requirements have been aligned as far as possible across financial
institutions to minimize capital arbitrage.70 Insurance companies had until 1 January 2005 to comply with
the new requirements. There is no difference in the requirements for domestic or foreign-owned
companies except that offshore insurance business or reinsurance branches are exempted from the risk-
based capital framework; this is in recognition of the international nature of reinsurance business.

The Financial Industry Disputes Resolution Centre (FIDReC) is an independent one-stop service centre
where consumers may seek help to resolve their disputes with financial institutions. In August 2005,
FIDReC took over the duties of the Insurance Dispute Resolution Organisation as well as the Consumer
67
For example, the UK's Prudential and Canada's Manulife joint ventures were declared bankrupt. Both
bankruptcies were eventually overruled by the Supreme Court but at some cost to the reputation of the country's
legal system and insurance operating environment.
68
The Insurance Commissioner's Department of the MAS licences insurance companies. Insurers are
required to maintain two forms of solvency margins: a surplus of assets over liabilities applies to both the company
concerned and its individual funds.
69
A captive insurer is an insurer set up by a corporation principally to protect in-house risks. Captive
insurers write the direct insurance and reinsurance risks of related companies.
70
Besides refining the treatment of liability risk, MAS also looked at capital charges for asset risks to help
to level the playing field between banks and insurance companies, and minimize opportunities for capital arbitrage.
The new capital requirements should also provide an early indicator of financial weaknesses, and thus facilitate
progressive intervention by regulators (MAS online information. Viewed at: http://www.mas.gov.sg/
news_room/statements/2002/Keynote_Address_by_DPM_Lee_Hsien_Loong_at_the_International_Insurance_
Society_s_38th_Annual_Seminar__15_July_2002.html).
Mediation Unit of the Association of Banks in Singapore. The dispute resolution process comprises a
mediation stage followed by the adjudication stage, where necessary. The consumer may reject the
adjudicator's decision, and pursue other resolution options, such as filing a lawsuit. The financial
institution (for example an insurance company), however, is bound by the adjudicator's decision should
the consumer choose to accept it.

Under the Insurance Regulations 2005, no person is allowed to obtain effective control (defined as
owning 20% or more of issued shares or voting power) or acquire a substantial shareholding (5% or more
of issued shares or voting power) of any locally incorporated insurer without MAS approval. The Act
also requires insurers to seek MAS approval for appointments of both principal officers of all insurers and
the directors of locally incorporated insurers (captive insurers are exempt).

Despite substantial growth in the past few years, the insurance sector accounted for only about 6% of total
financial sector assets in 2007. At end 2007, there were 153 insurance companies operating in Singapore:
61 were direct insurers, 32 re-insurers, and 60 captive insurers. Total assets of the insurance industry
amounted to S$113.1 billion at end 2006; American International Assurance (US), Great Eastern Life,
NTUC Income and Prudential Assurance Singapore (UK) together account for approximately 80% of life
insurance assets.71

As was the case at the time of the previous Review, the award of a direct insurance licence by the MAS
takes into account a number of factors including reputation and track record but the "commitment to
contribute to Singapore's development as a regional insurance hub and an international financial centre" is
no longer considered relevant. According to the authorities, MAS policy on admission to the reinsurance
market is unchanged. The minimum capital requirements of S$25 million for direct insurers and re-
insurers, also noted in the previous Review, have not changed. Domestic-owned and foreign-owned
insurers have the same requirements; for Singapore branches of foreign incorporated insurers, the paid-
up capital of the legal entity is used for the assessment on whether the requirement is fulfilled. According
to the authorities, branches do not have to set aside a separate amount of capital. Regarding the personal
tax treatment of contributions to life insurance/pension plans, there is no difference in treatment for
domestic or foreign-owned companies.

71
MAS Insurance Statistics, 2006. Viewed at: http://www.mas.gov.sg/data_room/insurance_stat/
2006/Insurance_Statistics_2006.html.