The Financial Supervisory Commission (FSC) of Taiwan will implement International Financial Reporting Standard 17 (IFRS17) "Insurance Contracts" in 2026, which will significantly change the presentation of accounting items in financial reports.
In view of the above implementation the FSC is proposing to amend Article 5 of Financial Supervisory Commission Regulations Governing the Standards of the Calculation and Payment of Examination Charges and Annual Supervisory Fees and the Collection of Official Fees, in order to update the definition of substantive operating revenue for the insurance companies, aligning it with future
IFRS17 financial reporting disclosures. The draft amendment will be announced soon.
The supervisory fees paid by the insurance companies are calculated based on "substantive operating revenue".
The revised definition will take effect starting with the calculation of supervisory fees for the year 2027. The scope of substantive operating revenue for insurance institutions will be amended as follows:
1.Additions:
(1)"Insurance revenue" and "income or expenses from reinsurance contracts held".
(2) Net investment income, except the following rules, is based on the sum of gains on relevant items:
a. Gain (loss) on financial assets and liabilities measured at fair value through profit or loss, calculated based on gains after including the amount recognized under the undistributed earnings on the disposal of equity instruments at fair value through other comprehensive income.
b. Foreign exchange gain (loss), calculated based on profits after including net changes in foreign exchange valuation reserve.
c. Excludes "portions related to separate accounts" and "net changes in financial liabilities measured at amortized cost of investment contracts".
(3) "Asset management service revenue" and "Other operating revenue".
2.Deductions:
(1) Insurance service expenses: Including incurred claims, other incurred insurance service expenses, and any subsequent changes in fulfilment cash flows reacting to incurred claims and incurred expenses related to past event.
(2) Insurance finance expenses (excluding portions related to separate accounts).
(3) Finance expenses from reinsurance contracts held.
(4) Net changes in special reserves for compulsory automobile liability insurance.
(5) Reserve for adjustments of the bonus due to the offset between mortality gain (loss) and gain (loss) from the difference of interest rates.
This amendment has been brought following extensive consultations and consensus-building with the insurance industry. After IFRS17 implementation, insurers will calculate their supervisory fee base using the revised formula and figures disclosed in their IFRS17 financial statements.
The FSC emphasises that to ensure the amendment is comprehensive and inclusive of diverse opinions, the draft amendment and explanatory notes will be published in the Executive Yuan Gazette.
Additionally, the full explanatory document and comparison table of the revised provisions will be made available on the FSC's "Regulation Draft Announcement Forum" webpage within the "Laws and Regulations Retrieving System." The public is invited to provide comments through the webpage within 60 days from the day following the announcement.