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Added the procedure of setting out special reserves for life insurance enterprises in accordance with Paragraph 4 of Article 32 of the Regulations Governing Financial and Business Reports of Insurance Enterprises
Trisha Chang/Shufei Yang
On 30 November 2012, the FSC issued supplemental regulations of Paragraph 4 of Article 32 of the Regulations Governing Financial and Business Reports of Insurance Enterprises, regarding special reserves recorded under "Liabilities". Main points of the supplemental regulations are as follows:
1.
From 1 January 2013, a life insurance company is allowed to reclassify "Special Reserves Recorded Under Liabilities" as "Policy Reserves - Fair Value of Debts of Insurance Contracts" per the definition given by the FSC's letter dated 27 November 2012. If the balance is not zero after such reclassification, eighty percent of the special reserves is allowed to be reclassified as legal surplus under the account of shareholders equity in the first year or over five years but such recovered legal surplus shall not exceed NTD10 billion per year.
2.
A life insurance company shall review the rationale of the reclassified special reserves each year and first supplement, if necessary, the "Policy Reserves-The Fair Value of Debts of The Insurance Contracts" within the amount of added value of real property. If the aforesaid added value is insufficient, the shortfall may be supplemented over the following years. The aforesaid principle is applicable to life insurance enterprises that need not to fortify policy reserves and allocate legal surplus.
3.
The aforesaid special reserves or legal surplus shall be recovered, allocated or used for other purposes upon approval of the competent authority.
4.
A life insurance company shall review the rationale of the reclassified special reserves each year and first supplement, if necessary, the "Policy Reserves-The Fair Value of Debts of The Insurance Contracts" within the amount of added value of real property. If the aforesaid added value is insufficient, the shortfall may be supplemented over the following years. The aforesaid principle is applicable to life insurance enterprises that need not to fortify policy reserves and allocate legal surplus.
