Considering that insurance companies need to appoint domestic and foreign banks to provide collateral management service about the operational activities of receiving, delivering, valuating and exchanging collaterals when conducting derivative transactions with counterparties and both agree on the collaterals to be delivered and received, the FSC issued the interpretative order on December 29, 2016. According to the order, procedures for processing derivatives transactions as defined by the first paragraph of Article 13 of the Regulations Governing Derivatives Transactions Conducted shall be incorporated into related guidelines by insurance companies to ensure safety of their fund.

Such procedures include selection and evaluation criteria of collateral management institution, items of the agreement with the collateral management institution for managing collateral reception and delivery activities, and an independent, effective risk management mechanism. Moreover, an insurance company that conducts the aforementioned collateral management operations by itself is required to incorporate the aforementioned procedures about an independent, effective risk management mechanism in its related guidelines.