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TABLE OF CONTENTS CHAPTER I GENERAL PRINCIPLES CHAPTER II ACCOUNTING TREATMENTS OF CEDED-OUT BUSINESS CHAPTER III ACCOUNTING TREATMENTS OF CEDED-IN BUSINESS CHAPTER IV PRESENTATION CHAPTER I GENERAL PRINCIPLES Article 1. For the purpose of regulating the recognition and measurement of reinsurance contracts, as well as the presentation of relevant information, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. The term "reinsurance contract" refers to an insurance contract under which the insurer (cedant) cedes a certain portion of a premium to another insurer (reinsurance acceptor) and the reinsurance acceptor makes compensations to the cedant for the compensation cost and other relevant expenses arising from the original insurance contract. Article 3. These Standards shall apply to the reinsurance contracts issued and held by insurers. A sub-reinsurance contract under which an insurer cedes a reinsurance business, which is ceded to it, to another insurer shall be governed by these Standards. Article 4. The original insurance contracts issued by insurers shall be governed by the Accounting Standards for Enterprises No. 25-Original Insurance Contracts. CHAPTER II ACCOUNTING TREATMENTS OF CEDED-OUT BUSINESS Article 5. No cedant may offset the assets formed by reinsurance contracts against the liabilities formed by the relevant original insurance contracts. No cedant may offset the incomes or expenses formed by the reinsurance contracts against the expenses or incomes formed by the relevant original insurance contracts. Article 6. A cedant shall, in the current period of recognition of the premium income of an original insurance contract, calculate and determine the ceded premium according to the reinsurance contract and record it in the profits and losses of the current period. In the mean while, if the original insurance contract is a non-life original insurance contract, the cedant shall, under the relevant stipulations of the reinsurance contract, calculate and recognize the receivable reinsurance unearned premium reserve as an asset and offset it against the unearned premium reserve. When the cedant adjusts the balance of the unearned premium reserve on the original insurance contract on the balance sheet date, it shall adjust the amount of the receivable reinsurance unearned premium reserve accordingly. Article 7. A cedant shall, in the current period of recognition of the premium income of the original insurance contract, calculate and determine the reinsurance expenses which should be recovered from the reinsurance acceptor and record them in the profits and losses of the current period. Article 8. A cedant shall, in the current period of making a reserve for unearned premium, reserve for life insurance liabilities or reserve for long-term health insurance liabilities on an original insurance contract, calculate and determine the corresponding reserve that should be recovered from the reinsurance acceptor according to the stipulations of the relevant reinsurance contract, and shall recognize the corresponding receivable reinsurance reserve as an asset. Article 9. A cedant shall, in the current period of determining and offsetting the amount of an indemnity payment or the expenses actually incurred for the settlement of a claim against the balance of the corresponding reserve on the original insurance contract, offset it against the balance of the corresponding receivable reinsurance reserve. In the mean while, it shall, according to the stipulations of the re-insurance contracts, calculate and determine the compensation cost that should be recovered from the reinsurance acceptor, and record it in the profits and losses of the current period. Article 10. A cedant shall, in the current period of canceling an original insurance contract, calculate and determine the amount of adjustment to the ceded premium or the recovered reinsurance expenses according to the stipulations of the relevant reinsurance contract, and record it in the profits and losses of the current period. In the mean while, it shall write off the amount of the relevant receivable reinsurance reserve. Article 11. A cedant shall, in the current period of making an adjustment to the compensation cost of an original insurance contract due to obtainment or disposal of any post-loss goods, or recognition and receipt of any subrogation recourse fee, calculate and determine the amount of adjustment to the to-be-recovered compensation cost according to the stipulations of the relevant reinsurance contract, and record it in the profits and losses of the current period. Article 12. When a cedant issues a reinsurance bill, it shall recognize the reinsurance guarantee to be deposited in the current period as stated in the bill as the deposited-in reinsurance guarantee. In the mean while, it shall write off the relevant deposited-in reinsurance guarantee according to the refund of the deposited-in reinsurance guarantee of the previous period as stated in the bill. The cedant shall, under the relevant reinsurance contract, calculate the interest on the deposited-in reinsurance guarantee of each period and record it in the profits and losses of the current period. Article 13. When a cedant is able to calculate and determine the net profit commissions which it should charges the reinsurance acceptor, it shall, according to the stipulations of the relevant reinsurance contracts, treat the profit commission as a recovered reinsurance expense, and record it in the profits and losses of the current period. Article 14. For a excess of loss reinsurance or any other non-proportional reinsurance contract, the cedant shall, under the stipulations of the reinsurance contract, calculate and determine the premium to be ceded out, and record it in the profits and losses of the current period. When the cedant makes an adjustment to the premium, it shall record the amount of adjustment in the profits and losses of the current period. When the cedant is able to calculate and determine the compensation cost that should be recovered from the reinsurance acceptor, it shall record the to-be-recovered compensation cost in the profits and losses of the current period. CHAPTER III ACCOUNTING TREATMENTS OF CEDED-IN BUSINESS Article 15. No reinsurance premium income may be recognized unless it meets the following conditions simultaneously: (1) The reinsurance contract is established and the relevant insurance liabilities are undertaken; (2) The economic benefits relating to the reinsurance contract are likely to flow in; and (3) The economic benefits relating to the reinsurance contract can be measured reliably. The reinsurance acceptor shall calculate and determine the amount of reinsurance premium income under the stipulations of the reinsurance contract. Article 16. A reinsurance acceptor shall, in the current period of recognizing a reinsurance premium income, calculate and determine the reinsurance expenses according to the stipulations of the reinsurance contract, and record them in the profits and losses of the current period. Article 17. When a reinsurance acceptor is able to calculate and determine the net profit commissions which it should pay to the cedant, it shall, under the stipulations of the relevant reinsurance contract, treat the profit commissions as a reinsurance expense and record it in the profits and losses of the current period. Article 18. When a reinsurance acceptor receives a reinsurance bill, it shall make an adjustment to the relevant premium income and premium expenses according to the amount as specified in the bill, and record the amount of adjustment in the profits and losses of the current period. Article 19. A reinsurance acceptor shall comply with the relevant provisions of the Accounting Standards for Enterprises No. 25 ¨C Original Insurance Contracts when it makes reserves for unearned reinsurance premiums, outstanding reinsurance claims, reinsurance life insurance liabilities and the reinsurance of long-term health care insurance liabilities, and tests the adequacy of the relevant reserves. Article 20. A reinsurance acceptor shall, in the current period of receipt of a reinsurance bill, treat the amount of the reinsurance indemnity payment specified in the said bill as the reinsurance compensation cost and record it in the profits and losses of the current period. In the mean while, it shall offset it against the balance of the reinsurance reserve. Article 21. When a reinsurance acceptor receives a reinsurance bill, it shall recognize the reinsurance guarantee to be deposited in the current period as stated in the bill as the deposited-out reinsurance guarantee. In the mean while, it shall write off the relevant deposited reinsurance guarantee according to the refund of the deposit-out reinsurance guarantee of the previous period as stated in the bill. The reinsurance acceptor shall, under the stipulations of the reinsurance contract, calculate the interest on the deposit-out reinsurance guarantee of each period and record it in the profits and losses of the current period. CHAPTER IV PRESENTATION Article 22. An insurer shall, in its balance sheets, separately present the following items relating to the reinsurance contracts: (1) The reinsurance receivables; (2) The receivable unearned reinsurance premium reserve; (3) The receivable reserve for outstanding reinsurance claims; (4) The receivable reserve for reinsurance life insurance liabilities; (5) The receivable reserve for the reinsurance of long-term health insurance liabilities; and (6) The reinsurance payables. Article 23. An insurer shall, in its profit statements, separately present the following items relating to the reinsurance contracts: (1) The reinsurance premium income; (2) The ceded-out premiums; (3) The recovered reinsurance expenses; (4) The reinsurance expenses; (5) The recovered compensation cost; (6) The reinsurance compensation cost; (7) The recovered reinsurance compensation cost; (8) The recovered reserve for life insurance liabilities; and (9) The recovered reserve for long-term health insurance liabilities. Article 24. An insurer shall, in its notes, disclose the following information relating to the reinsurance contracts: (1) The information about the increase and decrease of the reinsurance reserves for the ceded-in business; and (2) The main actuarial assumptions and methods for making reinsurance reserves and testing the adequacy of the reinsurance reserves for the ceded-in business. |
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