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Article 1 |
These regulations are stipulated pursuant to the provision of Paragraph 3 of Article 47 of the Compulsory Automobile Liability Insurance Act (hereinafter referred to as “this Act”).
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Article 2 |
The amount of unearned premium reserve that shall be set aside for compulsory automobile liability insurance (hereinafter referred to as ”this Insurance”), for a one-year policy period, shall not be less than one-half of the retained pure premium for the most recent 12 months, as of the last day of the preceding month; for a policy period of more than one year and up to two years, it shall not in the first year be less than three-fourths of the retained pure premium for the most recent 12 months, as of the last day of the preceding month, and in the second year, it shall not be less than one-fourth of the retained pure premium for the most recent 12 months, as of the last day of the preceding month.
The term "last day of the preceding month" in the preceding paragraph refers to the last day of the month that precedes the first day after the valuation date for provision of data assessment.
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Article 3 |
An insurer shall estimate and set aside a loss reserve for the outstanding claim of its retained business in this Insurance case by case, based on the relevant information. In respect of incurred but not reported claim, it shall deposit a loss reserve in amount of one percent of the retained unearned premiums for the most recent 12 months. The loss reserves shall be recovered during final accounting in the following fiscal year, and new loss reserves shall be set aside based on that current fiscal year's final accounting data.
The outstanding claim stipulated in the preceding paragraph shall be closed by the insurer when the claimant’s right is barred due to time limitation, except for any evidence showing that the period of prescription is suspended or interrupted.
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Article 4 |
An insurer shall set aside a special reserve for this Insurance pursuant to the following provisions:
1. The total sum of retained earned pure premium, recovered loss reserve and interests of the balance of the special reserve in the previous year, after deducted by the retained claim payment and the deposited claim reserve, shall be completely set aside as a special reserve;
2. If the total sum of retained earned pure premium, recovered loss reserve and interests of the balance of the special reserve in the preceding fiscal year is less than the total sum of the retained claim payment and the deposited loss reserve, the deficit shall be amended with the recovered special reserve accumulated in the previous years. If any deficit remains, the balance shall be recorded as a memorandum entry and amended with the recovered special reserves in the following year.
The fixed special reserve ratio in the premium rate structure of this Insurance in the year of 2005 shall be set aside in premium basis of premium rate tariff announced by the competent authority.
In the final account of this Insurance for the year of 2005, if it is in conformance with the conditions set out in the first subparagraph of the first paragraph, the fixed special reserve required in the preceding paragraph shall be completely set aside as a reserve; if it is in conformance with the conditions set out in the second subparagraph of the first paragraph, the deficit may be amended by the fixed special reserve stipulated in the preceding paragraph.
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Article 5 |
For the special reserve set aside by the insurer pursuant to the preceding article, the insurer shall purchase treasury bills or deposit the reserve with a financial institution as a time deposit. Provided that with the approval of the competent authority, the insurer may purchase the following domestic securities:
1. Government bonds, not including exchangeable government bonds.
2. Financial bonds, negotiable certificates of deposit, banker's acceptances, and commercial paper guaranteed by a financial institution, provided that financial bonds shall be limited to ordinary financial bonds only.
The amount of treasury bills purchased or time deposits placed in a financial institution under the preceding paragraph shall not be less than 30 percent of the total amount of the insurer's retained earned pure premiums for this Insurance in the most recent period, as audited or reviewed by a certified public accountant. The competent authority may raise that percentage to a level it deems appropriate based on the insurer's operational status.
The financial institution that handles the deposit, issuance, acceptance, or guarantee of the time deposits made or securities purchased by the insurer pursuant to the first paragraph shall have a long-term credit rating of "twBBB+" or higher from the Taiwan Ratings Corporation, or an equivalent or higher rating from another international credit rating institution acknowledged by the competent authority, provided that this requirement shall not apply if the securities are guaranteed by another financial institution that meets the same credit ratings as above.
If the balance of the insurer's special reserve is less than 30 percent of the total amount of the insurer's retained earned pure premiums for this Insurance in the most recent period, as audited or reviewed by a certified public accountant, then the full amount of its special reserve shall be used to purchase treasury bills or be deposited in a financial institution as a time deposit.
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Article 6 |
Except for the special reserve set aside as prescribed in the preceding Article, funds held by an insurer for this Insurance shall be deposited in a financial institution in the form of demand deposits and time deposits, provided that with the approval of the competent authority, an insurer may purchase any of the following domestic securities:
1. Treasury bills.
2. Negotiable certificates of deposit, banker's acceptances, and commercial paper guaranteed by a financial institution.
3. Government bonds in a repo transaction.
The term "funds" in the preceding paragraph refers to all types of reserves, payables, temporary receivables and suspense.
The amount of demand deposits deposited in financial institutions under the first paragraph shall not be less than 60 percent of the balance remaining after subtracting the amount of special reserves from the amount of funds held by the insurer due to the operation of this Insurance, or less than 40 percent of the retained earned pure premium for the most recent period as audited or reviewed by a certified public accountant. The competent authority may raise the percentage of demand deposits required by the insurer to a level it deems appropriate based on the insurer's operational status.
If the total amount of unearned premium reserve and loss reserve of the insurer with respect to this Insurance is less than 40 percent of the retained earned pure premiums of this Insurance for the most recent period as audited or reviewed by a certified public accountant, the funds held by the insurer due to the operation of this Insurance shall be deposited in full with a financial institution in the form of demand deposits.
The financial institution that handles the deposit, issuance, acceptance, or guarantee of the demand deposits or time deposits made or securities purchased by the insurer pursuant to the first paragraph shall have a long-term credit rating of "twBBB+" or higher from the Taiwan Ratings Corporation, or an equivalent or higher rating from another international credit rating institution acknowledged by the competent authority, provided that this requirement shall not apply if the securities are guaranteed by another financial institution that meets the same credit ratings as above.
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Article 7 |
When an insurer makes an allocation of its funds pursuant to the two preceding Articles, the calculation of its funds shall be based on the final (audited) figures for the most recent period as audited or reviewed by a certified public accountant.
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Article 8 |
The special reserve of this Insurance shall not be reversed and treated as “revenues or gains” except that it is used to offset an annual pure premium deficit.
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Article 9 |
The interest referred to in Article 4 of these Regulations shall be calculated based on the average of the fixed interest rates posted for Bank of Taiwan one year term savings deposits on the first business day of each month of the given fiscal year. The special reserve set aside for each fiscal year shall begin to accrue interest from January 1 of the following year.
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Article 10 |
The accumulated special reserve of the compulsory automobile third party liability insurance before the implementation of this Insurance shall be transferred into the special reserve as mentioned in Article 4 of these Regulations.
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Article 11 |
When an insurer suspends business operations or terminates its operation of this Insurance, the various reserves for this Insurance shall be transferred into the various reserves set aside by the successor insurer for this Insurance.
When there is no other insurer to assume the insurer’s assets or liabilities of this Insurance that the insurer has been ordered to suspend business and undergo rehabilitation or to dissolve, the various reserves for this Insurance shall be transferred to the Non-Life Insurance Stabilization Fund.
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Article 12 |
These Regulations shall be implemented from January 1, 2010.
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