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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II DETERMINATION OF ORIGINAL INSURANCE CONTRACTS CHAPTER III THE INCOME FROM ORIGINAL INSURANCE CONTRACTS CHAPTER IV RESERVES FOR THE ORIGINAL INSURANCE CONTRACTS CHAPTER V COST OF ORIGINAL INSURANCE CONTRACTS CHAPTER VI PRESENTATION CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the presentation of the recognition, measurement and presentation of the relevant information of the original insurance contract issued by an insurant, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. The term "insurance contract" refers to an agreement in which the insurer and the insured stipulate the insurance rights and obligations and under which the insurer undertakes the insurance risks sourced from the insured. Insurance contracts are classified into original insurance contracts and re-insurance contracts. The term "original insurance contract" refers to an insurance contract under which the insurer charges the insured premium and undertakes the liability to pay the insurance money for the property losses resulting from the specified possible accident(s); or undertakes the liability to pay the insurance money the insured dies, is injured, disabled or sick or attains to the stipulated age or time period. Article 3. The following items shall be governed by other relevant accounting standards: (1) The impairment of assets such as the post-loss goods brought about by an original insurance contract issued by an insurer shall be governed by Accounting Standards for Enterprises No. 1-Inventories; (2) A contract issued by an insurer to the insured on a risk other than the insurance risks shall be governed by the Accounting Standards for Enterprises No. 22-Recognition and Measurement of Financial Instruments and the Accounting Standards for Enterprises No. 37-Presentation of Financial Instruments; and (3) A reinsurance contract issued or held by an insurer shall be governed by the Accounting Standards for Enterprises No. 26-Reinsurance Contracts. CHAPTER II DETERMINATION OF ORIGINAL INSURANCE CONTRACTS Article 4. No matter whether or not a contract concluded by an insurer and the insured is an original insurance contract, whether or not the insurer has undertaken the insurance risks shall, on a single contract basis, be judged according to the contractual terms. If the occurrence of an insurance accident is likely to cause the insurer to undertake the liability to pay the insurance money, it shall be determined that the insurer has undertaken the insurance risk. The term "insurance accident" refers to the accidents which are specified in an insurance contract and fall within the scope of insurance liabilities. Article 5. If a contract concluded by an insurer and the insured puts the insurer in a position of not only undertaking the insurance risks but also other risks, it shall be treated in light of the following circumstances, respectively: (1) If the portion of insurance risks can be distinguished from the portion of other risks and can be measured respectively, the portion of insurance risks may be separated from the portion of other risks. The portion of insurance risks shall be determined as an original insurance contract. The portion of other risks shall not be determined as an original insurance contract; (2) If the portion of insurance risks cannot be distinguished from the portion of other risks, or if the portion of insurance risks can be distinguished from the portion of other risks but can not be measured respectively, the entire contract shall be determined as an original insurance contract. Article 6. If the insurer shall, according to whether or not it undertakes the liability to pay the insurance money during the extension period of the original insurance contracts, classify the original insurance contracts into original insurance contracts of life insurance and original insurance contracts of non-life insurance. If the insurer undertakes the liability to pay the insurance money during the extension period of an original insurance contract, it shall determine it as an original insurance contract of life insurance. If does not undertake the liability to pay insurance money during the extension period of an original insurance contract, it shall determine it as an original insurance contract of non-life insurance. The extension period of an original insurance contract refers to the period for which the insured does not pay premium from the maturity date of the previous period, but during which the insurer still undertakes the liability to pay the insurance money. CHAPTER III THE INCOME FROM ORIGINAL INSURANCE CONTRACTS Article 7. No premium income may be recognized unless the following conditions are recognized: (1) An original insurance contract has been established and the corresponding insurance liabilities have been undertaken; (2) The economic benefits relating to an original insurance contract is highly probable to flow in; and (3) The income relating to an original insurance contract can be measured reliably. Article 8. An insurer shall calculate and determine the amount of premium income according to the following provisions: (1) For an original insurance contract of non-life insurance, the amount of premium income shall be determined according to the total premium as stipulated in the original insurance contract; and (2) For an original insurance contract of life insurance, if the premium as charged by installments, the amount of premium income shall be the premium charged in the current period. If the premium is charged in a lump sum, the premium income shall be determined according to the premium which should be charged in a lump sum. Article 9. If an original insurance is cancelled prior to the expiration date, the insurer shall, pursuant to the stipulations of the original insurance contract, determine the refund to the insured as the refund premium and record it in the profits and losses in the current period. CHAPTER IV RESERVES FOR THE ORIGINAL INSURANCE CONTRACTS Article 10. The reserves for original insurance contracts include unearned premium reserves, reserves for outstanding claims, reserves for life insurance liabilities and reserves for long term health insurance liabilities. The term "unearned premium reserves" refers to the reserves made by an insurer for unexpired non-life insurance liabilities. The term "reserve for outstanding claims" refers the reserves made by an insurer for the non-life insurance accidents which have already occurred but have not been settled. The term "reserves for life insurance liabilities" refers to the reserves made by an insurer for unexpired life insurance liabilities. The term "reserves for long term health insurance liabilities" refers to the reserves the made by an insurer for unexpired long term health insurance liabilities. Article 11. An insurer shall, in the current period of recognition of the income from non-life insurance premiums, make an unearned premium reserve as an adjustment to the premium income of the current period at the actuarial amount and recognize the unearned premium reserves as a liability. An insurer shall, on the balance sheet date, recalculate the difference between the recognized amount of the unearned premium reserves and the residual amount of the unearned premium reserves on the basis of the actuarial amount and shall make an adjustment to the unearned premium reserves. Article 12. An insurer shall, in the current period of recognition of income from non-life insurance premiums, make a reserve for outstanding claims on the basis of the actuarial amount and shall recognize the reserve for outstanding claims as a liability. The reserve for outstanding claims includes the reserve for outstanding claims that are incurred and reported, the reserve for outstanding claims that are incurred but not reported as well as the reserve for the expenses of settlement of claims. The expression "reserve for outstanding claims that are incurred and reported" refers to the reserve made by an insurer for the compensation cases, in which non-life insurance accidents have occurred and claims are made to the insurer, but which are not settled yet. The expression "reserve for outstanding claims that are incurred but not reported" refers to the reserve made by an insurer for the compensation cases, in which non-life insurance accidents have occurred, but no claim is made to the insurer yet. The expression "reserve for the expenses of settlement of claims" refers to the reserve made by an insurer for the attorney's fee, litigation fee, loss inspection fee, and wages and salaries of the personnel for the settlement of claims, and other expenses which are likely to incur in compensation cases, in which non-life insurance accidents have occurred, but which have not been settled yet. Article 13. An insurer shall, in the current period of recognition of life insurance premiums, make reserves for life insurance liabilities and long term health insurance liabilities on the basis of the actuarial amounts, and shall recognize the reserves for life insurance liabilities and those for long term health insurance liabilities as liabilities. Article 14. An insurer shall, at least by the end of each year, test the adequacy of the reserves for outstanding claims, the reserves for life insurance liabilities, and the reserves for long term health insurance liabilities. If the amount of a relevant reserve which is recalculated and determined by the insurer on the basis of the actuarial amount exceeds the residual amount of a relevant reserve which has been made on the adequacy test date, the relevant reserve shall be replenished on the basis of difference. If the amount of a relevant reserve which is recalculated and determined by the insurer on the basis of the actuarial amount is less than the residual amount of a relevant reserve which has been made on the adequacy test date, no adjustment shall be made to the relevant reserve. Article 15. Where an original insurance contract is cancelled prior to its expiration date, the insurer shall write off the residue amounts of the relevant reserves for unearned premiums, life insurance liabilities and long term health insurance liabilities and recorded them in the profits and losses of the current period. CHAPTER V COST OF ORIGINAL INSURANCE CONTRACTS Article 16. The cost of original insurance contracts refers to total outflow of economic benefits, which is incurred by the original insurance contracts, will result in the decrease of the owner¡¯s equities and is irrelevant to the distribution of profits to the owners. The cost of original insurance contracts mainly includes the handling fee or commission, compensation cost, as well as the reserves for outstanding claims, life insurance liabilities and long term health insurance liabilities. The compensation cost includes the indemnity or payment made by the insurer, and the expenses for the attorney¡¯s fee, litigation fee, loss inspection fee, wages and salaries of the personnel for the settlement of claims which are incurred during the course of settlement of the claims. Article 17. An insurer shall record the handling fees and commissions, which are incurred in the course of obtaining the original insurance contracts, in the profits and losses of the current period. Article 18. An insurer shall record in the profits and losses of the current period the reserves for outstanding claims, reserves for life insurance liabilities, and the reserves for long term health insurance liabilities, which are made on the basis of the actuarial amounts. An insurer shall, in the period of determination of the amount of compensation to be made, record the amount of compensation determined to be made in the profit and loss. In the mean while, the insurer shall offset that amount against the residual amount of the corresponding reserve for outstanding claims, reserves for life insurance liabilities or reserves for long term health insurance liabilities. An insurer shall record the amount of the claim expenses that are actually incurred in the profit and loss in the period the claim expenses are incurred. Meanwhile, the insurer shall offset that amount against the residual amount of the corresponding reserve for outstanding claims, reserves for life insurance liabilities or reserves for long term health insurance liabilities. Article 19. An insurer shall record in the profits and losses of the current period the reserves for outstanding claims, reserves for life insurance liabilities or for long term health insurance liabilities, which are replenished according to the adequacy test. Article 20. Any post-loss goods obtained by an insurer due to undertaking the liability to pay the insurance money shall be and recognized as an asset at the amount calculated the market price of the same class of or similar asset, and shall offset the compensation cost of the current period. When disposing of any post-loss goods, the insurer shall adjust the compensation cost of the current period according to the difference between the amount received and the carrying amount of the post-loss goods. Article 21. If the subrogation recourse fee to be charged by an insurer for undertaking the liability to pay the insurance money satisfies the following conditions simultaneously, it shall be recognized as the receivable subrogation recourse fee and shall offset the compensation cost of the current period: (1) The economic benefits relating to this subrogation recourse fee is likely to flow in; and (2) The amount of the subrogation recourse fee can be reliably measured. When an insurer receives the receivable subrogation recourse fee, it shall, according to the difference between the received amount and the carrying amount of the relevant receivable subrogation recourse fee, adjust the compensation cot of the current period. CHAPTER VI PRESENTATION Article 22. An insurer shall, in the balance sheets, separately present the following items relating to the original insurance contracts: (1) The unearned premium reserve; (2) The reserve for outstanding claims; (3) The reserve for life insurance liabilities; and (4) The reserve for long term health insurance liabilities. Article 23. An insurer shall, in the profit statement, present separately the following items relating to the original insurance contracts: (1) The income from premiums; (2) The refunded premiums; (3) The unearned premium reserve; (4) The premiums earned; (5) The disbursement of handling fee; (6) The compensation cost; (7) The reserve for outstanding claims; (8) The reserve for life insurance liabilities; and (9) The reserve for long term health insurance liabilities. Article 24. An insurer shall, in its notes, disclose the following information relating to the original insurance contracts: (1) The relevant information about the subrogation recourse fee; (2) The relevant information about the post-loss goods; (3) The increase and decrease of each reserve; and (4) The main actuarial assumptions and methods for making reserves and testing the adequacy of the reserves. |
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