INSURANCE ACCOUNTING REGULATIONS, 2012
[Gazette of Pakistan, Extraordinary, Part-II, 22nd November, 2012]
S.R.O. 1383(I)/2012, dated 19.11.2012.—In exercise of powers conferred under sub-section (3) of Section 167 of the Insurance Ordinance, 2000 (XXXIX of 2000), read with sub-section (2) of Section 46 thereof, and sub-section (2) of Section 40 of the SECP Act, 1997 (XLII of 1997), the Securities and Exchange Commission of Pakistan is hereby pleased to publish the following draft regulations for the information of all persons likely to be affected thereby and notice is hereby given that objections or suggestions if any, received within a period of thirty (30) days from the date of its publication in the official Gazette, shall be taken into consideration.
1. Short title and commencement.—(1) These regulations shall be called Insurance Accounting Regulations, 2012.
(2) These regulations shall come into force at once.
2. Definitions.—In these Regulations, unless there is anything repugnant in the subject or context,—
(i) "Ordinance" means the Insurance Ordinance, 2000 (XXXIX of 2000);
(ii) "Commission" means the Securities and Exchange Commission of Pakistan established under Section 3 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);
(iii) "Regulatory Returns" means the statements which are required to be presented by Insurers under Section 46 of the Ordinance as prescribed in Annexure-II of the Securities and Exchange Commission (Insurance) Rules, 2002;
(iv) "Published Financial Statements" means the accounts which are required to be presented by Insurers under Section 46 of the Ordinance as prescribed in Annexure-II of the Securities and Exchange Commission (Insurance) Rules, 2002;
(v) "Policyholder Liabilities" has the same meaning given under Section 2 of the Insurance Ordinance, 2000.
3. Application and Scope.—(1) These Regulations shall be applied to the Regulatory Returns and the Published Financial Statements, except in so far as:
(i) any of its provisions includes an express statement that it is not to apply to the Regulatory Returns or to the Published Financial Statements, as the case may be; and
(ii) a provision contained in the Companies Ordinance or in Rules thereto or in an instrument issued there under overrides a provision in these Accounting Regulations so far as concerns the Published Financial Statements.
(2) Every Insurer shall comply, so far as concerns recognition and measurement of assets, liabilities, expenses and revenues, with International Financial Reporting Standards which are adopted by the Institute of Chartered Accountants of Pakistan and notified by the Commission.
4. Provisions applicable only to Regulatory Returns only.—(1) Where an insurer controls other entities, then consolidated Regulatory Returns are not required to be presented.
(2) Explanatory Notes are not required in the Regulatory Returns except as specified in these Regulations or as specified in the Forms of Regulatory Returns.
5. Provision for statements to be prepared.—While preparing statements as required under sub-section (1) and (2) of Section 46 of the Insurance Ordinance, 2000, an insurer carrying on life insurance business shall comply with the requirements of Part A and an insurer carrying on non-life insurance business shall comply with the requirements of Part B.
6. Provisions applicable only to Published Financial Statements.—(1) For the purpose of classification and disclosure of profits;
(i) Profits for the year disclosed in the Published Financial Statements shall be determined by consolidating revenues and expenses relating to the Statutory as well as Shareholders' Fund. Except for the provisions relating to Ledger Accounts A and B below, balances retained within Statutory Funds over and above insurance liabilities shall be treated as a part of shareholders' equity and not as liabilities.
(ii) For the purpose of Published Financial Statements, Insurance Liabilities stated in the Statement of Financial Position shall include any balances in Ledger Accounts A and B in Statutory Funds which include participating business. Balances in Ledger Accounts C and D shall be included as part of Shareholders' Equity. Ledger Accounts A, B, C and D shall be as is defined in Section 22 of the Ordinance.
7. Segment analysis.—(1) Some of the forms of Published Financial Statements specified in the Annexure II of the Securities and Exchange Commissioner (Insurance) Rules, 2002 provide segment analysis by type of business as well as fund (statutory fund or shareholders' fund). If the company writes any type of business which is different from other types of business in terms of nature of products or types of risks in addition to the segments already identified in the said published forms, if the gross premiums for that class constitute 10% or more of the gross premium revenue of the insurer the gross premiums for such types of business shall be disclosed separately.
(2) If an insurer writes business outside Pakistan then a complete set of Regulatory Returns except for Form LA shall be prepared for such business.
8. Audit Report.—Both the Regulatory Returns and Published Financial Statements shall be accompanied by an Audit Report as required under S. 48(2) of the Ordinance in accordance with the formats as specified by the Commission from time to time.
9. Appropriation of profit to shareholders' fund from statutory funds (Applicable to Regulatory Returns only).—(1) An appropriation of profit from a statutory fund shall be recorded as an appropriation in the revenue account of that statutory fund in the financial period in which it is made, and shall not be recorded as an expense.
(2) An appropriation of profit from a statutory fund shall be recorded as revenue of the shareholders' fund in the financial period in which it is made.
10. Shareholder interests in statutory funds (Applicable to Regulatory Returns only).—(1) The shareholders' fund shall not recognize as an asset any interest in, entitlement to the assets of or capital transfer provided to any statutory fund.
(2) A capital transfer provided to a statutory fund by the shareholders' fund shall be recorded as a debit balance in shareholders' equity, clearly identified as capital contributed to statutory fund, and changes in the amount of capital contributed to statutory funds shall not pass through the profit and loss account but shall be recorded in the financial statements of the shareholders' fund as increases or decreases in that debit balance.
(3) No statutory fund shall recognize as a liability any amount due to the shareholder's fund consisting of a capital transfer received from a shareholder's fund, or retained profits attributable to shareholders, or any loan or advance, other than a current liability consisting of amounts due to the shareholder's fund on account of expenses due to be reimbursed to the shareholder's fund.
11. Shareholders' Fund and Policyholders' funds (Applicable to Regulatory Returns only).—(1) The amount representing the residue of assets left after all liabilities other than policyholder liabilities in the balance sheet of a statutory fund or the aggregate statutory funds balance sheet in the statutory accounts shall be disclosed as equity and policyholder funds.
(2) The following components of equity and policyholder funds shall be separately disclosed:
(i) Policyholder liabilities (inclusive of bonuses allocated);
(ii) Retained earnings attributable to participating policy holders which have not yet been distributed (Ledger Account A);
(iii) Retained earnings arising from participating business, attributable to shareholders but not available for distribution (Ledger Account B);
(iv) Retained earnings arising from participating business, attributable to shareholders and available for distribution (Ledger Account C);
(v) Retained earnings arising from business other than participating business, attributable to shareholders (Ledger Account D);
(vi) Surplus not yet allocated;
(vii) Shareholders' capital in the statutory fund; and
(viii) Such reserves, whether or not prescribed, as may be established by the statutory fund.
(3) The Notes to these statements shall include disclosure of movements in each of the accounts set out in sub-clause (2).
(4) Where these statements are made up to a date as at which a valuation of policyholder liabilities in accordance with Section 50 of the Ordinance is carried out by the company's appointed actuary, the amount of policyholder liabilities recorded in these statements shall be the greater of the amount of policyholder liabilities certified by the appointed actuary and the minimum actuarial reserve for policyholder liabilities.
(5) Where these statements are made up to a date as at which a valuation of policyholder liabilities in accordance with Section 50 of the Ordinance is not carried out by the company's appointed actuary, the amount of policyholder liabilities recorded in these financial statements shall be the greater of the amount of policyholder liabilities certified by the appointed actuary and the minimum actuarial reserve for policyholder liabilities at the valuation most recently performed.
(6) The Notes to these statements shall show the allocation of surplus, if any, in the financial year, required to be made under Section 21 of the Ordinance, and such accounts as are relevant shall be recorded following such allocation of surplus.