萬國法律事務所

Taiwan’s Statement of Financial Accounting Standards No. 40 (“SFAS No. 40”), which is of significant concern for the insurance industry, is scheduled to take effect on January 1, 2011 through the enforcement of the Financial Reporting Taxonomies of the Insurance Industry.

The Financial Supervisory Commission of the Executive Yuan (“FSC”) incorporated the spirit of the SFAS No. 40 into the Financial Reporting Taxonomies of the Insurance Industry and is ready to release the full content shortly. It is expected that the influence ratio with respect to the SFAS No. 40 will be revealed within the industry at the earliest by the first quarter of 2011 and, accordingly, two to three insurers may have to improve the preparation for the adequacy of recognized insurance liabilities to a limited extent, said the Deputy Director of the Insurance Bureau of the FSC.

The SFAS No. 40 is in response to the worldwide growing trend to implement Phase I of the International Financial Reporting Standards (“IFRS”), which merely requires the insurers to classify the insurance contracts and conduct the test for the adequacy of recognized insurance liabilities. In particular, Phase I of the IFRS allows the test of cash flows to be performed based on the current hypothesis and thus insurers in general expect the influence to be minor.

The bigger challenge will come along with the implementation of Phase II of the IFRS, where fair value measurements are planned to be imposed. Then again, the effective date of Phase II of the IFRS has been left undecided ever since the occurrence of the global financial crisis.