The CIRC Strictly Prohibits Insurance Companies From Using Reserves To Control Profits.

The issue of the reserve fund has been published recently by the CIRC on the situation of Yongan's property insurance Limited by Share Ltd to mention the reserve requirement (hereinafter referred to as the "bulletin"), and it is strictly prohibited to regulate the profit and solvency status through the provision of less reserves, and will strictly investigate and punish the behavior of providing less reserves in violation of the relevant provisions.

The insurance company extracts the corresponding part from the premium of the current income and enters the next fiscal year as a source of funds that has not yet been paid for an insurance accident.

According to the regulation, property insurance, liability insurance and one-year life insurance business shall be left with outstanding claims reserves.

Taking Yongan property insurance as an example, its total reserves in 2007 were less than 215 million yuan, so that its pre tax operating profit in 2007 increased by 215 million yuan. At the end of 2007, the solvency adequacy ratio increased from -184% to -151%.

It is strictly prohibited to regulate profits and solvency through less provision, so as to ensure that the results of the reserve assessment are scientific and reasonable.

We should strengthen the work of the key link of reserve evaluation, and choose reasonable actuarial models and assumptions according to the characteristics of insurance, data quality and risk distribution.

We should carefully choose the development factor according to the law of the occurrence of the case, the speed of closing the case, the changing trend of the average compensation, and the development of the insurance claim practice.

Companies with insufficient empirical data should follow the prudence principle and choose the estimated compensation rate based on reference to industry data.

The development of reserve assessment results in 2007 should be improved in 2008 and in the future.

In addition, the bulletin also requires accounting firms to be invited to audit annual reports. They must have sufficient professional competence and professional skills in the reserve audit. They will be pferred to relevant government departments for failing to have sufficient professional competence and professional skills, and failing to perform the necessary audit procedures to lead to serious mistakes in the audit results of the reserve subjects.

We should strictly investigate and punish the behavior of violating the relevant provisions and reserve less money, and seriously investigate the responsibility of the company and the responsible persons concerned.