FSC: Kaohsiung Zone's Category 2 Operations to Go Nationwide in Q3

(Central News Agency reporters Su Szu-yun and Lu Yen-tzu, Taipei, June 16) The Financial Supervisory Commission (FSC) announced today that the pilot period for the Kaohsiung Special Zone will be extended by one year, ending on June 30, 2027. Zone operations are divided into two types: 'nationwide rollout' and 'new services.' Among them, family office advisory services and insurance policies exempt from the minimum ratio requirement of death benefits to policy value reserves under life insurance products are expected to be implemented nationwide in the third quarter of 2024.

Additionally, new services include expanding cross-border financial services to domestic high-net-worth clients, introducing prepaid premium insurance products, and relaxing the 99-investor cap for private placements of non-securities-investment-trust-fund-type offshore funds or private equity fund referrals.

The FSC held a press conference today to explain the Kaohsiung Special Zone plan. Tong Cheng-chang, Director of the FSC’s Banking Bureau, stated that since the release of the 'Guidelines for Financial Institutions Applying to Enter Local Asset Management Special Zones for Pilot Operations' on April 1 last year, 57 financial institutions have been approved to enter the zone for pilot operations. Considering the pilot period will end on June 30, and that some institutions still need time to accumulate practical experience and business volume, the pilot operations will be extended by one year to June 30, 2027.

Tong noted that as of the end of April, family office services have accumulated 161 clients, with entrusted asset management reaching NT$71.2 billion, achieving a significant scale. Moreover, family office workshops have established norms regarding internal controls and customer protection mechanisms required for banks engaging in family office services. Given that larger banks with faster progress have already established relevant teams and have the capacity to expand to nationwide branch networks, the nationwide rollout is expected to be officially announced in the third quarter of this year.

Currently, six life insurers in the Kaohsiung Special Zone are offering policies exempt from the minimum ratio requirement of death benefits to policy value reserves. These have accumulated 219 valid contracts, with total premium income reaching NT$3.6 billion.

Wang Li-hui, Director of the FSC’s Insurance Bureau, explained that in the past, to ensure life insurance policies maintain a certain level of coverage, death benefits must maintain a minimum ratio to policy value reserves across different age groups. In the Kaohsiung Special Zone, this requirement is waived. Given no customer complaints and proper risk control during the pilot, the FSC plans to extend this exemption nationwide.

Regarding new service directions, the FSC stated that preliminary evaluations include expanding banks’ cross-border services to domestic high-net-worth clients, relaxing the 99-investor limit for non-securities-investment-trust-fund-type offshore funds or private equity fund referrals, and allowing insurance products to establish dedicated prepaid premium accounts.

Tong explained that banks’ cross-border financial services will also expand to serve domestic high-net-worth clients. Conceptually, if a Taiwanese national already has accounts with a foreign bank in Singapore, a Taiwanese bank with a branch in Singapore could serve them. This measure aims to meet citizens’ existing cross-border asset needs, and since the related funds are already offshore, there is no concern about capital outflow.

On the relaxation of the 99-investor limit for non-securities-investment-trust-fund-type offshore funds or private equity fund referrals, Kao Ching-ping, Director of the FSC’s Securities and Futures Bureau, said industry associations have submitted relevant recommendations, with final decisions expected in July.

The FSC stated that items such as prepaid premiums, remote underwriting, policy succession, and flexible surrender in the insurance sector are also under consideration for the next wave of new pilot services in the zone. However, since financial institutions’ proposed products may involve multiple sectors, details still require discussion.

Wang further explained that practices like prepaid premiums in Singapore and Hong Kong allow high-net-worth clients to prepay premiums, preventing missed payments and aiding in asset succession. This also enables insurers to reduce fee costs and improve policy persistency. (Edited by Lin Shu-yuan) 1150616