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Article 5 |
The special reserves set aside by professional reinsurance enterprises for their retained businesses shall include the following:
1.Special reserves for extraordinary business losses: Reserves set aside for large amount of reinsurance claims arising from extraordinary business losses.
2.Special reserves for fluctuation of risks: Reserves reserve for extraordinary changes in loss ratio or in reinsurance claims under the line of reinsurance.
3.Special reserves for other special needs: The methods of increasing and releasing reserves and the cap of accumulated reserve shall be pre-approved by the competent authority.
Extraordinary business losses referred to in subparagraph 1 of the preceding paragraph means losses arising from any of the following events and the accumulated retained reinsurance claims in a single event total reach NT$100 million or more:
1.A ceding insurer is subject to bankruptcy or liquidation proceedings, or involved in lawsuit or other extraordinary events, and the professional reinsurance enterprises are obligated to continue the payment of reinsurance claims and expenses for their outstanding liabilities.
2.Typhoon, earthquake, flood, tsunami or other natural disasters.
3.Air crash, conflagration, war, terrorist attack or other man-made disasters.
The term "retained reinsurance claim" in the preceding paragraph includes paid, reported but not paid, and incurred but not reported (IBNR) reinsurance claims.
Starting January 1, 2011, the amount of special reserves as specified in Paragraph 1 hereof set aside each year less income tax pursuant to Statement of Financial Accounting Standards No. 22 shall be recorded in the account of "Special Reserve" under "Owner's Equity."
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Article 6 |
Professional reinsurance enterprises shall reserve or dispose special reserves for extraordinary business losses for retained business according to the following provisions:
1.The provision for special reserves for extraordinary business losses shall be one (1) percent of the retained reinsurance premium. The provision ratio shall be increased to three (3) percent for extraordinary business losses involving earthquake, war or terrorist attack.
2.In case of an extraordinary business losses, the portion of retained reinsurance claim that exceeds NT$100 million may be offset by special reserves for extraordinary business losses.
3.Where the special reserves for extraordinary business losses has been reserved for more than fifteen (15) years, the appointed actuary may evaluate and draft a releasing reserves mechanism and report such mechanism and any subsequent changes thereto to the competent authority for recordation.
Starting January 1, 2011, the amount that can be offset or released as provided in subparagraph 2 or 3 of the preceding paragraph may be offset or released by or from special reserves for extraordinary business losses recorded under "Liabilities." Where such special reserves for extraordinary business losses is insufficient for the offset or release, the amount of shortfall less income tax pursuant to Statement of Financial Accounting Standards No. 22 may be offset or released by or from special reserves for extraordinary business losses recorded in the account of "Special Reserve" under "Owner's Equity."
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Article 7 |
Professional reinsurance enterprises shall, by each line of reinsurance, reserve or dispose special reserves for fluctuation of risks for their retained businesses according to the following provisions:
1.If the incurred loss ratio calculated based on the amount of retained reinsurance claim minus the offset by special reserves for extraordinary business losses for the line of reinsurance is lower than the average incurred loss ratio in the past fifteen (15) fiscal years, the professional reinsurance enterprises shall reserve special reserves for fluctuation of risks in an amount at no less than thirty (30) percent of the difference.
2.If the incurred loss ratio calculated based on the amount of retained reinsurance claim minus the offset by special reserves for extraordinary business losses for the line of reinsurance exceeds the average incurred loss ratio in the past fifteen (15) fiscal years, the professional reinsurance enterprises shall release special reserves for fluctuation of risks in an amount equal to the excess portion.
3.When the accumulated provision for special reserves for fluctuation of risks is more than sixty (60) percent of the retained earned premium for the current year, the professional reinsurance enterprises may release the excess portion.
Starting January 1, 2011, the amount that can be offset or released as provided in subparagraph 2 or 3 of the preceding paragraph may be offset or released by or from special reserves for fluctuation of risks recorded under "Liabilities." Where such special reserves for fluctuation of risks is insufficient for the offset or release, the amount of shortfall less income tax pursuant to Statement of Financial Accounting Standards No. 22 may be offset or released by or from special reserves for fluctuation of risks recorded in the account of "Special Reserve" under "Owner's Equity."
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Article 8-1 |
Starting January 1, 2011, for insurance contracts that must undergo liability adequacy test in accordance with Statement of Financial Accounting Standards No. 40, professional reinsurance enterprises shall carry out adequacy test for a recognized insurance liability based on the current estimate of its future cash flows on the balance sheet date. If the test result shows that the carrying amount of the insurance liability is inadequate, a liability adequacy reserve shall be set aside for the amount of shortfall.
The method used for conducting liability adequacy test as provided in the preceding paragraph shall comply with relevant principles of actuarial practice.
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Article 9 |
Unless it is otherwise provided in other laws and regulations and liability adequacy reserve, professional reinsurance enterprises shall set aside reserves for its assumed reinsurance business, retrocession business, and retained business in accordance with these Regulations. The professional reinsurance enterprises shall also prepare related statements according to the accounting system or accounting principles approved by the competent authority, and record the information in a separate account book.
At the end of each fiscal year, the professional reinsurance enterprises shall also file with the competent authority actuary-certified information on reserves it has reserved for its assumed reinsurance business and retained business for the year according to the format and contents specified by the competent authority.
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