In accordance with the "Basic Standards for Enterprise Accounting", the Ministry of Finance issued CAS No. 25 — Original Insurance Contracts on 2006/2/15, effective as of 2007/1/1. This standard was superseded by the revised Insurance Contract Standards in 2020.
1. Overview of Guidelines
This standard specifies the recognition, measurement, and disclosure requirements for direct insurance contracts. A direct insurance contract is an agreement under which the insurer receives premiums from the policyholder and assumes the obligation to pay claims or benefits.
Types of Insurance Contracts
- Life Insurance Policy
- • Non-life insurance contracts
- • Based on the degree of risk transfer, contracts are classified as either direct insurance contracts or reinsurance contracts.
II. Premium Revenue
Non-life insurance contracts
Premium revenue from non-life insurance contracts shall be recognized when the contract is established and the insurer assumes the corresponding insurance liability.
Life Insurance Policy
Premium revenue from life insurance contracts shall be recognized when the contract is established and the corresponding insurance liability is assumed.
III. Contractual Reserve
Types of Reserves
- • Unexpired liability reserve: The reserve set aside for non-life insurance business to cover coverage obligations that have not yet expired.
- • Outstanding claim reserves: Funds set aside for claims that have not yet been settled.
- • Life insurance policy reserves: Reserves set aside for life insurance obligations that have not yet terminated.
- • Long-term health insurance policy reserves: Reserves set aside for long-term health insurance business covering unexpired insurance obligations.
4. Claims Paid
Insurers shall reasonably estimate the claim liability in the period when the obligation is determined, using established methods, and recognize it in current-period earnings.
Claim Costs
Direct and indirect claims expenses incurred by the insurer during the claims settlement process shall be allocated to current earnings using a reasonable method.
Regulatory Document Attachment
Accounting Standards for Business Enterprises No. 25 — Original Insurance Contracts (2006) (PDF)