A Commentary on Articles 123-1, 123-2, 129-1, and 132-1 of the Insurance Act

Key Takeaways

• Health and accident insurance surrender values are now fully exempt from compulsory execution.

• Life insurance surrender values are executable only above a statutory threshold.

• Eligible family members and beneficiaries may intervene and assume policyholder status within

   three months of attachment or insolvency proceedings.

• The reform significantly narrows the scope of insurance assets available to creditors in

   enforcement proceedings.

Abstract

This article explains the 2025 amendments to Taiwan's Insurance Act and their practical impact on enforcement against insurance assets. Promulgated on 18 June 2025 and effective from 20 June 2025, the amendments materially reconfigure the extent to which insurance assets may be subjected to compulsory execution. The reform introduces categorical exemptions for health and accident insurance, establishes a statutory threshold for the execution of life insurance surrender values, and creates a novel intervention mechanism allowing designated family members and beneficiaries to assume policyholder status in enforcement scenarios. Collectively, these measures reflect a legislative shift toward strengthening insurance protection while preserving a calibrated enforcement framework for creditors.

1. How Insurance Policies Are Treated in Debt Enforcement

Under Taiwan's compulsory execution regime, a debtor's assets are generally subject to attachment and liquidation unless expressly exempted. Insurance contracts, particularly life insurance policies with accumulated cash surrender value, have long occupied a structurally ambiguous position within this framework: they function both as protection instruments and as latent financial assets.

The tension between creditor recovery and the protective purpose of insurance has been central to enforcement jurisprudence. The 2025 reform represents a legislative response to this tension, recalibrating the balance in favour of policy protection while preserving limited enforceability in defined circumstances.

2. The Supreme Court's Position Before the Reform: Grand Chamber Judgment 108-Tai-Kang-Da-897

In its decision of 9 December 2022 (108-Tai-Kang-Da-897), the Supreme Court Grand Chamber confirmed that a life insurance policy may, in appropriate circumstances, be terminated through enforcement proceedings, with the resulting cash surrender value made available to creditors:

             "The enforcement court may, where necessary, issue an order to terminate a life insurance

              policy in which the debtor is the policyholder and direct the third-party insurer to pay the

             cash surrender value."

The Court grounded its reasoning in the economic structure of level-premium life insurance, under which accumulated premiums generate a realizable cash value. It simultaneously emphasised, however, that enforcement courts must exercise discretion with due regard to the protective function of insurance for the policyholder and dependents.

The 2025 amendments may be understood as a partial codification and refinement of this jurisprudential position, replacing discretionary balancing with more structured statutory rules.

3. What the 2025 Reform Changes

The amendments introduce Articles 123-1, 123-2, 129-1, and 132-1. Pursuant to Article 178 of the Insurance Act, the amended provisions take effect on the date of promulgation; under Article 13 of the Central Regulations Standard Act, this means the provisions become effective on the third day following promulgation — i.e., 20 June 2025. While formally discrete, these provisions operate as an integrated enforcement regime governing insurance assets.

3.1 Health and Accident Insurance: Fully Exempt from Enforcement (Articles 129-1 and 132-1)

Articles 129-1 and 132-1 establish an absolute exemption from compulsory execution for the cash surrender values of health and accident insurance policies. The text of the two provisions is materially parallel:

              Article 129-1: "The cash surrender value of a health insurance contract in which the debtor is

              the policyholder shall not be subject to attachment or compulsory execution."

              Article 132-1: "The cash surrender value of an accident insurance contract in which the

              debtor is the policyholder shall not be subject to attachment or compulsory execution."

Although such policies rarely generate substantial surrender values in practice, the legislative effect is not merely symbolic. It eliminates residual uncertainty in enforcement practice and prevents the disruption of coverage that serves immediate protective and social welfare functions.

3.2 Life Insurance: A New Threshold for Enforceability (Article 123-1)

Article 123-1 introduces a quantitative threshold governing the executability of life insurance surrender values. The statutory formula, expressly set out in Article 123-1, Paragraph 1, is:

  Threshold = Minimum monthly living standard (as published by the Ministry of Health and

  Welfare or by a municipal government) × 1.2 × 6 months — taking the highest applicable

  standard.

Applying the 2025 Taipei City figure of NTD 20,379 per month (the highest among municipal standards), the threshold computed under the statutory formula is approximately NTD 146,729 (NTD 20,379 × 1.2 × 6 = 146,729). The figure is subject to annual adjustment in line with the published minimum living standards.

Where the surrender value falls below this threshold, the policy is insulated from execution. The provision replaces the prior case-by-case proportionality analysis under Article 122 of the Compulsory Execution Act with a more administrable, rule-based mechanism — reflecting a broader trend in Taiwanese enforcement law toward the objectification of previously discretionary assessments.

3.3 The Right of Intervention (Article 123-2)

Article 123-2 introduces a novel "Right of Intervention," permitting designated persons to assume policyholder status in the context of enforcement proceedings. Eligible parties are:

         •       Persons with an insurable interest in the insured;

         •       Named beneficiaries designated by the policyholder;

         •       The spouse, parents, or children of either the policyholder or the insured.

The third category is narrowly drawn — it is limited to spouse, parents, and children, and does not extend to siblings, grandparents, or grandchildren.

The mechanism is subject to two cumulative requirements: (i) written consent of both the policyholder and the insured, and (ii) payment of an amount equivalent to the projected surrender value to the enforcement authority or its designated recipient.

A critical feature of the provision is its temporal limitation. The right must be exercised within three months of the triggering enforcement event. This period is generally understood as a preclusive (peremptory) window — meaning, in principle, it is not subject to the suspension or interruption rules that apply to ordinary statutes of limitation. The legislative intent is to ensure procedural finality in enforcement proceedings.

4. Before and After: A Summary

The table below summarises the legal position before and after the 2025 reform:

        Category                             Pre-2025 Position                     Post-2025 Position

                                                                                                                   (Promulgated 18 June 2025;

                                                                                                                     effective 20 June 2025)

    Health insurance                    Generally attachable                     Fully exempt (Art. 129-1)

    surrender value

    Accident insurance                Generally attachable                     Fully exempt (Art. 132-1)

    surrender value                                 

    Life insurance                         Subject to discretionary                Executable only above                    

    surrender value                       execution                                        statutory threshold (Art. 123-1)    

    Family substitution                Not recognised                               Statutory intervention right

    mechanism                                                                                             (Art. 123-2)

    Investment-linked                  Generally exempt under                Unchanged

    policy assets                           prior rules (Art. 123 III)

5. What This Means in Practice

5.1 For Creditors

For judgment creditors, the reform narrows the enforceable insurance asset base in two respects: the categorical exclusion of certain policy types and the threshold-based limitation for life insurance.

Enforceability is not eliminated but restructured. Life insurance remains a viable enforcement target where the surrender value exceeds the statutory threshold. In such cases, creditors must also account for the possibility of intervention by eligible third parties, which may alter the procedural timeline without necessarily affecting ultimate recovery value.

An unresolved issue concerns whether ancillary contractual rights — particularly the policyholder's entitlement to take a policy loan from the insurer — fall within the scope of attachable assets, a question likely to be shaped by future judicial interpretation.

5.2 For Policyholders and Beneficiaries

From the perspective of policyholders and their families, the reform enhances asset protection in three respects:

     •       Absolute protection of health and accident insurance;

     •       Statutory insulation of low-value life insurance policies;

     •       A structured mechanism enabling preservation of policies through substitution in

             enforcement contexts.

The introduction of the intervention mechanism is particularly significant, as it transforms what was previously a passive risk of liquidation into an actively manageable legal option.

5.3 How to Exercise the Right of Intervention

The exercise of the right of intervention requires compliance with a tightly structured sequence:

       • Occurrence of a triggering enforcement event (attachment of the surrender value, or the

                policyholder's bankruptcy/insolvency proceedings);

       • Written consent of both policyholder and insured;

       • Payment of the surrender-value equivalent to the enforcement authority or its designated

                recipient;

       • Formal notification to the insurer, upon delivery of which the substitution takes effect.

Failure to complete these steps within the three-month window results in forfeiture of the right. The mechanism thus combines substantive preservation rights with strict procedural discipline.

5.4 Transitional Rule: Cases Predating the Amendment

Article 123-2, Paragraph 3 extends limited protection to cases where the triggering enforcement event occurred prior to the amendment's effective date. Where the insured event has not yet occurred, eligible parties may exercise the right of intervention within three months from 20 June 2025. This window provides a remedial opportunity for families whose policies were attached before the reform took effect, and is of considerable practical importance.

6. Conclusion

The 2025 amendments to Taiwan's Insurance Act represent a deliberate recalibration of enforcement policy rather than a wholesale reallocation of rights between creditors and policyholders.

By introducing a categorical exemption regime for health and accident insurance, a threshold-based model for life insurance execution, and a structured intervention mechanism, the legislature has replaced case-by-case balancing with clearer, rule-based standards. Enforcement against insurance assets is no longer a purely judicial balancing exercise but a procedurally structured system incorporating both quantitative thresholds and time-bound substitution rights.

For creditors and insurers alike, the reform shifts insurance enforcement from a discretionary regime to a more rule-based system.

Several practical questions remain open, particularly regarding the treatment of policy loan rights and the interaction between enforcement law and complex insurance products such as investment-linked policies. These issues are likely to be resolved through subsequent judicial interpretation and administrative guidance.

Tags

#InsuranceLaw #TaiwanLaw #LifeInsurance #DebtRecovery #WealthProtection #LegalUpdate

#保險法修正 #強制執行 #人壽保險 #解約金 #介入權 #債權回收 #家事資產規劃