FSC Amends Investment-Linked Insurance Regulations, Prohibiting Linkage to TLAC Bonds
Taiwan's Financial Supervisory Commission (FSC) announced amendments to investment-linked insurance regulations, effective tomorrow, to strengthen policyholder rights and align with market practices. The changes prohibit investment-linked policies from being linked to TLAC bonds and set limits on investments in non-investment grade and emerging market bonds through certain funds.
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- 📰 Published: April 28, 2026 at 23:23
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Taipei, April 28 (CNA) The Financial Supervisory Commission (FSC) announced today that to strengthen policyholder rights and comply with practical approaches, it has amended the "Matters for Attention Regarding Custodian Institutions and Investment Targets of Investment-Linked Insurance Dedicated Accounts" and other regulations. These amendments include prohibiting investment-linked insurance policies from being linked to Total Loss Absorbing Capacity (TLAC) bonds, and setting limits for 'class-of-delegated-management' investment-linked policies that invest in non-investment grade bonds and emerging market bonds through actively managed ETFs, domestic and foreign ETFs, and index funds. The changes will take effect tomorrow.
FSC Insurance Bureau Deputy Director Tsai Huo-yen explained that to protect policyholder rights, comply with practical approaches, and ensure consistent regulatory standards across various industries, the FSC has amended Article 14 of the "Regulations Governing Investment-Linked Insurance" (Management Regulations) and points 7 and 8-2 of the "Matters for Attention Regarding Custodian Institutions and Investment Targets of Investment-Linked Insurance Dedicated Accounts" (Matters for Attention).
Regarding the amendments to the Matters for Attention, Tsai Huo-yen pointed out, first, considering that TLAC bonds (Total Loss Absorbing Capacity) have different risk characteristics from general bonds, and currently securities firms and trust enterprises are not permitted to accept non-professional investors' mandates to invest in TLAC bonds, to ensure consistent regulatory standards across industries, it is explicitly stipulated that investment targets linked to investment-linked insurance policies cannot include TLAC bonds. While no existing investment-linked insurance policies are currently linked to TLAC bonds, this regulation is proactively put in place to prevent future occurrences.
Second, the amendments strengthen the investment limits for investment-linked insurance policies linked to funds that focus on investing in non-investment grade bonds and emerging market bonds. Tsai Huo-yen noted that to protect policyholder rights, in addition to the previously stipulated bond-type funds, actively managed ETFs, domestic and foreign ETFs, and index funds are also included in the limit control under point 8-2 of the Matters for Attention, with the existing limit ratios maintained.
Tsai Huo-yen stated that when 'class-of-delegated-management' investment-linked policies are linked to the aforementioned funds, the combined investment ratio ceiling for funds investing in non-investment grade bonds and emerging market bonds shall not exceed 20%, with the investment ratio ceiling for funds focused on non-investment grade bonds not exceeding 10%. Other investment-linked insurance products are not permitted to be linked to such funds.
The FSC stated that considering the value of investment targets linked to investment-linked insurance policies also constitutes part of the insurance payout, it is advisable for the characteristics of investment targets linked to investment-linked insurance policies to be long-term and stable. Therefore, through this amendment, the FSC hopes to properly manage the risks of investment targets linked to investment-linked insurance policies to protect policyholder rights.
TLAC refers to the situation after the 2008 financial crisis, where many banks faced financial crises and were ultimately bailed out by governments, which sparked controversy. To solve the problem of banks being "too big to fail," the US Financial Stability Board required banks to "self-rescue," which led to the creation of TLAC. (Edited by Yang Kai-xiang) 1150428
FSC Insurance Bureau Deputy Director Tsai Huo-yen explained that to protect policyholder rights, comply with practical approaches, and ensure consistent regulatory standards across various industries, the FSC has amended Article 14 of the "Regulations Governing Investment-Linked Insurance" (Management Regulations) and points 7 and 8-2 of the "Matters for Attention Regarding Custodian Institutions and Investment Targets of Investment-Linked Insurance Dedicated Accounts" (Matters for Attention).
Regarding the amendments to the Matters for Attention, Tsai Huo-yen pointed out, first, considering that TLAC bonds (Total Loss Absorbing Capacity) have different risk characteristics from general bonds, and currently securities firms and trust enterprises are not permitted to accept non-professional investors' mandates to invest in TLAC bonds, to ensure consistent regulatory standards across industries, it is explicitly stipulated that investment targets linked to investment-linked insurance policies cannot include TLAC bonds. While no existing investment-linked insurance policies are currently linked to TLAC bonds, this regulation is proactively put in place to prevent future occurrences.
Second, the amendments strengthen the investment limits for investment-linked insurance policies linked to funds that focus on investing in non-investment grade bonds and emerging market bonds. Tsai Huo-yen noted that to protect policyholder rights, in addition to the previously stipulated bond-type funds, actively managed ETFs, domestic and foreign ETFs, and index funds are also included in the limit control under point 8-2 of the Matters for Attention, with the existing limit ratios maintained.
Tsai Huo-yen stated that when 'class-of-delegated-management' investment-linked policies are linked to the aforementioned funds, the combined investment ratio ceiling for funds investing in non-investment grade bonds and emerging market bonds shall not exceed 20%, with the investment ratio ceiling for funds focused on non-investment grade bonds not exceeding 10%. Other investment-linked insurance products are not permitted to be linked to such funds.
The FSC stated that considering the value of investment targets linked to investment-linked insurance policies also constitutes part of the insurance payout, it is advisable for the characteristics of investment targets linked to investment-linked insurance policies to be long-term and stable. Therefore, through this amendment, the FSC hopes to properly manage the risks of investment targets linked to investment-linked insurance policies to protect policyholder rights.
TLAC refers to the situation after the 2008 financial crisis, where many banks faced financial crises and were ultimately bailed out by governments, which sparked controversy. To solve the problem of banks being "too big to fail," the US Financial Stability Board required banks to "self-rescue," which led to the creation of TLAC. (Edited by Yang Kai-xiang) 1150428