Ministry of Finance, Provisions on the Accounting Treatment of Insurance Contracts

Issued: December 22 2009

Applicability: Insurance companies shall start implementing these Provisions when they prepare their 2009 annual financial reports (Article 4).

Main contents: The Provisions set out the accounting treatment for the split of hybrid insurance contracts, testing of major insurance risks, and measurement of the reserves for insurance contracts. Where the insurance risks and other risks involved in an insurance contract can be distinguished and separately measured, the two categories of risks shall be recognised as attributable to an insurance contract and a non-insurance contract respectively. Where the risks may not be distinguished or separately measured, the entire contract shall be recognised as an insurance contract if the insurance risks are major; otherwise the entire contract may not be recognised as an insurance contract (Article 1). Where the occurrence of an insurance incident specified in the contract may cause the insurer to pay major additional benefits, the contract shall be recognised as having major insurance risks, unless there is no commercial substance involved (Article 2).