BCTL Instruction no.06/2020 on Financial Reporting and Record-Keeping for General Insurance Companies

INSTRUCTION NO. 06/2020
ON FINANCIAL REPORTING, RECORD-KEEPING REQUIREMENTS FOR GENERAL INSURANCE COMPANIES The general Insurance companies shall prepare their financial statements in accordance with International Accounting Standard, unless otherwise prescribed by Instruction of BCTL as defined on article 35 of Law no. 6/2005, of 7 July on Regime for the Licensing, Supervision and Regulation of Insurance Companies and Insurance Intermediaries (Insurance Law). The general insurance companies shall prepare the financial report in accordance with the format approved by the BCTL as defined in article 37 of the Insurance Law. Considering that on the conducting of insurance business, it is required to all licensed insurance companies to submit their periodically financial reports to be filed at BCTL. The Governing Board of Banco Central de Timor-Leste pursuant to the authority granted in Article 31 paragraph 1 of Law no. 5/2011 of 15 June, and in the Insurance Law, hereby resolves to approve the following Instruction:
Article 1
Scope

1. This Instruction regulates the requirements on financial reporting by all general
   insurance companies.
2. This Instruction applies to all general insurance companies licensed by BCTL.
   Article 2
   Definitions
   For the purposes of this Instruction, the following definitions apply:
   a) “Financial Year” means the period of any consecutive twelve (12) months beginning on every 1 st January and ending on every 31 st of December each year; b) “BSA” or “Banking Supervision Application” shall mean a web-based banking supervision application responsible for the safe submission and validation of financial statements, and analysis of prudential indicators; c) “BCTL” means the Banco Central de Timor-Leste constituted pursuant to Law No. 5/2011 of June 15; d) “Financial Statements” refers to the balance sheet, income statement or profit and loss accounts, statement of changes in financial position, notes and other statements and explanatory material which are identified as being part of the financial statements; e) “Audited Annual Financial Statements” means the annual financial statements of the company, including the Directors report, statements by Directors, statutory declaration, auditors report, balance sheet, income statement, statement of changes in equity, general insurance revenue

account, cash flow statement and schedules of notes appended thereto prepared in a manner consistent with International Account Standards; f) “Consolidated Financial Statements” refers to the combined financial reports of a company together with its Affiliated and Subsidiary companies where one (or more) of such companies is an insurance company; g) “International Accounting Standards” means the International Financial Reporting Standards including International Accounting Standards and Interpretations with their related documents issued by the International Accounting Standards Board. h) “Incurred But Not Reported (IBNR) claims” means the amount owed by an insurer to all valid claimants who have had a covered loss but have not yet reported it. i) “Audit Opinion” means a formal report on the annual Financial Statements which provides the auditor’s conclusion, and which clearly sets forth a judgement upon the reasonability with which the financial statements present the insurer’s financial position and result of its operations and are presented in accordance with International Accounting Standards; j) “Quarter” means the period of any consecutive three (3) months ending on 31 st March, 30 th June, 30 th September and 31 st December each year.
Article 3
Purpose Accounting Standard Requirements

1. General insurance companies must establish a provision for unearned premiums
   to take account of the fact that policyholders often pay premiums in advance.

2. Under accrual accounting principles, amounts paid in advance of the rendering of
   a service must be reported as a provision for unearned premiums at the end of an accounting period when the policyholder is still to enjoy the benefit of that coverage.

3. General insurance companies must also establish a provision for claims and it
   shall meet the following requirements:
   a. This represents the company’s best estimate for the number of claims that it will need to pay; b. Claims are usually divided into those that have been reported but not yet paid and those that have been incurred but not yet reported (IBNR claims);
   c. All claim estimates should be fully justifiable and based on statistical
   evidence as prepared and reviewed by an actuary or by a provision for claims expert, as approved by BCTL.

4. The financial statements of the general insurance companies will record these
   established amounts or the actual amounts whichever is greater.
   Article 4
   Premium Register

5. All general insurance companies must maintain a premium register in which all
   premiums written, earned, receivable and collected are captured.

6. The premiums register must show, for each individual policy, the type of insurance
   policy issued, maximum amount of coverage offered, due date and actual payment date of premiums, the policyholder’s and beneficiary’s (if applicable) name and the insurance intermediary involved (if applicable).
   Article 5
   Premium Report

7. All general insurance companies must compile a monthly premiums report.

8. The report will provide details on the number of new policies issued the total of
   premiums written, earned, receivable and collected.

9. Premiums receivable and premiums past due at each month-end must be
   transferred to the next monthly premiums report.
   Article 6
   Claim Register

10. All general insurance companies must produce a claim register in which all claims
    are reported.

11. The claims register must record, for each individual claim, the type of claim, the
    anticipated amount of claim, a claim number, date of reception of the claim, the policyholder’s and beneficiary’s (if applicable) name and the insurance intermediary involved (if applicable).
    Article 7
    Claims Report

12. All general insurance companies must maintain a monthly claims report.

13. The report will provide details on the total number of claims received, claims paid,
    claims rejected and claims pending by claim type.

14. Pending claims at each month-end must be transferred to the next monthly
    claims register.
    Article 8
    Accounting Ledgers

15. All general insurance companies must produce a premiums ledger, claims ledger
    as well as the usual general ledger.

16. These ledger reports must be readily reconcilable to the monthly premiums and
    claims report as well as the underlying premiums and claims registers.
    Article 9
    General Guidance and Requirements electronic form

17. General insurance companies will maintain all their records in electronic form as
    long as these are easily accessible for internal and external auditors and BCTL Inspectors.

18. Electronic records must be backed up daily and the copies of all electronic records
    must be maintained in a secure off-site location.

19. Both on-site and off-site records, whether in hard copy or electronic form, must be
    kept safe from fire, theft, water damage, sabotage and other potential destructive risks.
    Article 10
    Requirements of Financial Reporting

20. General insurance companies doing business in Timor-Leste must submit
    monthly, quarterly and annual Financial Statements in conformity with International Accounting Standards, unless otherwise prescribed by Instruction of BCTL.

21. Annual Financial Statements must be audited by an independent external auditor
    approved in writing by the BCTL to certify the financial condition of insurance companies.

22. The audit referred to in the previous paragraph must be conducted in accordance
    with International Accounting Standards unless otherwise prescribed by Instruction of BCTL.

23. Insurance companies that are Affiliates or Subsidiaries must submit individual and
    Consolidated Annual Financial Statements to the BCTL.

24. The Board of Directors and management of insurance companies shall be
    responsible for the financial information contained in their Audited Financial Statements.

25. A copy of the board resolution adopting the Audited Financial Statements must be
    submitted to BCTL together with the Audit Financial Statements.

26. Every general insurance company licensed in Timor-Leste must submit three (3)
    copies of its Audited Annual Statements to the BCTL covering the Financial Year to 31 st December on or before 30 th April in the following year.
    Article 11
    Publication of Financial Statements

27. Within thirty (30) days of each calendar quarter, every insurance company shall
    publish in at least one national newspaper a fair and true summary of its quarterly balance sheet and income statements as at the end of the previous calendar quarter.

28. Within four months of the end of each Financial Year, every insurance company
    shall publish in at least a national newspaper a summary of its annual balance sheet and income statement for the previous year.

29. Branches of foreign general insurance companies shall publish their balance
    sheets and income statements on both an individual and consolidated basis.

30. Within four months of the end of each Financial Year, every insurance company
    shall publish on its website the annual report and Audited Annual Statements for the proceeding of Financial Year

31. The published annual balance sheet and income statement, accompanied by a
    certification from director/s designated by the Board of Directors, shall be submitted to BCTL within four months of the end of each Financial Year.
    Article 12

Date of Submission Financial Reports

1. General insurance companies must submit to the BCTL within ten (10) days
   following the end of each month, in signed hard copy form, the following monthly reports using the formats specified in the annexes to this Instruction:
   a) Statement of Investment; b) Statement of Outstanding Premiums; c) Statement of Premiums; d) Statement of Claims; e) Statement of Reinsurance; f) Statement of Loans; g) Statement of Borrowers;
2. General insurance companies must submit quarterly Financial Statements to the
   BCTL, in signed hard copy form, within ten (10) days of the end of the quarter, containing the following financial reports:
   a) Balance sheet; b) Income statement; c) Underwriting Results; d) Cash flow statement; e) Calculation of Minimum Solvency Margin in accordance with the requirements specified in BCTL regulations; f) Notes containing an explanation of any material change in the company’s business or accounting policies.
3. General insurance companies shall continue submitting the signed hard copy
   reports of the monthly and quarter reports, until further official notification from the BCTL to submit the reports through the BSA system.
   Article 13
   Numeral Conventions
   General insurance companies shall use the following conventions to submit numbers and currency on its financial statements:
   a) Decimal symbol shall be represented by a dot (.) b) Digit groupings shall be separated by a comma (,) c) The number of decimal places for monetary amounts shall be two.
   Article 14
   Remedial Measures and Administrative Sanctions Failure to comply with the provisions of this Instruction may subject a company and its directors and managers to the sanctions prescribed under the Insurance Law.

Article 15
Entry into Force
This Instruction shall enter into force on the day of its publication in the Official Gazette. Adopted on 28 August 2020 The Governor Abraão de Vasconselos
ANNEX 1: MONTHLY REPORT STATEMENT OF INVESTMENT
NAME OF INSURER :
PERIODS OF :

STATEMENTS OF INVESTMENT
DETAILS DATE OF
INVESTMENT
DATE OF
MATURITY
AMOUNT IN US$
EASILY CONVERTIBLE TO CASH
1.
2.
3.
4.
5.
6.
7.
8.
NOT EASILY CONVERTIBLE TO CASH
1.
2.
3.
4.
5.
6.
7.
8.

ANNEX 2: MONTHLY REPORT STATEMENT OF OUTSTANDING PREMIUMS
NAME OF INSURER :
PERIODS OF :

DESCRIPTION
STATEMENTS OF OUTSTANDING PREMIUMS
0 – 2 MONTHS >2 – 6 MONTHS >6 – 12 MONTHS >12 MONTHS AMOUNT PROVISION FOR DOUBTFUL AMOUNTS PROVISION FOR DOUBTFUL AMOUNTS PROVISION FOR DOUBTFUL AMOUNTS PROVISION FOR DOUBTFUL 1). DIRECT CLIENTS 2). COINSURANCE 3). AGENT 4). BROKERS 5). BANKING INSTITUTIONS 6. REINSURANCE
7. OTHERS
8.OUTSTANDING
PREMIUMS &
INTERMEDIARIES
BALANCE
TOTAL

ANNEX 3: MONTHLY REPORT STATEMENT OF PREMIUMS
NAME OF INSURER :
PERIODS OF :
STATEMENTS OF PREMIUMS
DESCRIPTION
PRODUCTS LINE OF GENERAL INSURANCE
MOTOR
VEHICLES
PERSONAL
ACCIDENT
PROPERTY/
FIRE
OTHERS TOTAL
AMOUNTS IN
US$
TOTAL PREMIUMS ( INCLUDING UNCLOSED BUSINESS & THIRD PARTY COLLECTION LESS RETURNED PREMIUMS

• DIRECT BUSINESS
• INWARD REINSURANCE BUSINESS
• THIRD PARTY COLLECTION
  GROSS PREMIUM INCOME ( A)
  TREATY REINSURANCE OUTWARDS :
  ( A). LOCAL
  ( B). OVERSEAS PROPORTIONATE
  ( C). OVERSEAS NON-PROPORTIONATE
  SUB-TOTAL ( TREATY)
  FACULTATIVE REINSURANCE OUTWARDS
  ( A). LOCAL
  ( B). OVERSEAS PROPORTIONATE
  ( C). OVERSEAS NON-PROPORTIONATE
  SUB-TOTAL (FACULTATIVE)
  TOTAL REINSURANCE ( B)
  NET PREMIUM INCOME ( A – B)
  RETAINED UNEARNED PREMIUM PROVISION
• UPP AT BEGINNING OF YEAR( A)
• UPP AT END OF YEAR ( B)
  SUBTOTAL ( A - B )
  NET EARNED PREMIUM ( C )
  NUMBER INDIVIDUAL POLICIES ISSUED
  NUMBER INDIVIDUAL POLICIES RENEWED
  NUMBER GROUP POLICIES ISSUED
  NUMBER GROUP POLICIES ISSUED RENEWED
  NUMBER PERSONS COVERED BY GROUP

ANNEX 4: MONTHLY REPORT STATEMENT OF CLAIMS
NAME OF INSURER :
PERIODS OF :

STATEMENTS OF CLAIMS
DESCRIPTION CLASSES OF GENERAL INSURANCE BUSINESS MOTOR VEHICLES PERSONAL ACCIDENT PROPERTY OTHERS TOTAL AMOUNTS US$ CLAIMS GROSS CLAIMS PAID

• DIRECT BUSINESS
• INWARD REINSURANCE BUSINESS
  SUB-TOTAL
  REINSURANCE RECOVERIES
  ( A). LOCAL
  ( B). OVERSEAS PROPORTIONATE
  ( C). OVERSEAS NON-PROPORTIONATE
  SUB-TOTAL ( TREATY)
  FACULTATIVE REINSURANCE OUTWARDS
  ( A). LOCAL
  ( B). OVERSEAS PROPORTIONATE
  ( C). OVERSEAS NON-PROPORTIONATE
  SUB-TOTAL (FACULTATIVE)
  NET CLAIMS PAID
  (A) NET CLAIMS OUTSTANDING - CLOSING
  (B) NET CLAIMS OUTSTANDING – OPENING
  NET CLAIMS INCURRED ( B-A)

NUMBER OF CLAIMS

ANNEX 5: MONTHLY REPORT STATEMENT OF REINSURANCE
NAME OF INSURER :
PERIODS OF :

STATEMENTS OF REINSURANCE
DESCRIPTION CLASSES OF GENERAL INSURANCE BUSINESS
PART A: RETENTIONS MOTOR
VEHICLES
PERSONAL
ACCIDENT
PROPERTY OTHERS AMOUNTS
US$
HIGHEST RISK RETENTION (NET)

• BASE RETENTION
• CO-INSURANCE ( IF ANY)
  SUB-TOTAL (HRR)
  MAXIMUM EVENT RETENTION (NET)
• BASE RETENTION
• CO-INSURANCE ( IF ANY)
  SUB-TOTAL (MER)
  PART B: LIMITS
  MAXIMUM ACCEPTANCE / UNDERWRITING LIMIT
  MAXIMUM AUTOMATIC PER RISK CAPACITY
  PART C: COVER
  MAXIMUM CATASTROPHE COVER ARRANGED
  NUMBER OF REINSTATEMENTS
  ACCUMULATED LOSS ( STOP LOSS)

ANNEX 6: MONTHLY REPORT STATEMENT OF LOANS
NAME OF INSURER :
PERIODS OF :
STATEMENTS OF LOANS
NO. DETAILS DATE OF
DISBURSEMENT
DATE OF
MATURITY
AMOUNT IN US$

ANNEX 7: MONTHLY REPORT STATEMENT OF BORROWERS
NAME OF INSURER :
PERIODS OF :

STATEMENTS OF BORROWING
NO. DETAILS AMOUNTS OUTSTANDING
BALANCE

ANNEX 8: QUARTER REPORT BALANCE SHEET
NAME OF INSURER :
PERIODS OF :
BALANCE SHEET
ASSETS AMOUNTS US$
ADMITTED ASSETS
CASH AND CASH EQUIVALENT
INVESTMENTS ( EASILY CONVERTIBLE INTO CASH) OUTSTANDING PREMIUMS AMOUNT DUE FROM REINSURANCE OTHER ADMITTED ASSETS NON-ADMITTED ASSETS ACCOUNT RECEIVABLES LOANS INVESTMENTS ( NOT EASILY CONVERTIBLE INTO CASH) FIXED ASSETS OTHER ASSETS TOTAL ASSETS

LIABILITIES
UNDERWRITING RESERVES
UNEARNED PREMIUMS RESERVES
OUTSTANDING CLAIMS
OTHER RESERVES
REINSURANCE PAYABLES
BORROWING
ACCRUAL AND DEFERRED INCOME
OTHER LIABILITIES
TOTAL LIABILITIES
SHAREHOLDER’S EQUITY
PAID-UP SHARE CAPITAL
RETAINED PROFITS/(LOSS)
RESERVES
CURRENT YEAR PROFIT/(LOSS)
TOTAL SHAREHOLDER’S EQUITY
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY

ANNEX 9: QUARTER REPORT INCOME STATEMENT
NAME OF INSURER :
PERIODS OF :

STATEMENTS OF PROFITS & LOSS AMOUNTS US$
PART A – RPOFITS AND LOSS ACCOUNT
NON UNDERWRITING INCOMES
ADD:
OTHER NON UNDERWRITING INCOMES
TOTAL NON UNDERWRITING INCOMES
UNDERWRITING SURPLUS/(DEFICIT)
OPERATING EXPENSES
EXTRAORDINARY
PROFITS/(LOSS) BEFORE TAX
TAXATION EXPENSES
NET PROFITS/(LOSS)
PART B- APPROPRIATION ACCOUNT
UNAPPROPRIATED PROFITS/(LOSS) BROUGHT FORWARD ADD:
PROFITS/(LOSS) AFTER TAXATION FOR THE CURRENT PERIODS LESS:
DIVIDENDS, TRANSFER AND OTHER APPROPRIATIONS

UNAPPROPRIATION PROFITS/(LOSS) CARRIED FORWARD

ANNEX 10: QUARTER REPORT UNDERWRITING RESULT
NAME OF INSURER :
PERIODS OF :

STATEMENTS OF UNDERWRITING RESULTS AMOUNTS US$
PART A- PREMIUMS
GROSS PREMIUMS
LESS:
REINSURANCE OUTWARDS
NET PREMIUM INCOMES
ADD:
RETAINED UNEARNED PREMIUM - OPENING
LESS:
RETAINED UNEARNED PREMIUM - CLOSING
NET EARNED PREMIMU ( A)
PART B- CLAIMS
NET CLAIMS PAID
REINSURANCE CLAIMS
ADD:
NET CLAIMS OUTSTANDING CLOSING
LESS:
NET CLAIMS OPENING
NET CLAIMS INCURRED ( B)
PART C – UNDERWRITING EXPENSES
COMMISSION EXPENSES
ACQUISITION EXPENSES
TOTAL EXPENSES ( C)
UNDERWRITING SURPLUS/(DEFICIT)
( A-B-C)
NET LOSS RATIO % ( B/ A)
EXPENSES RATIO % ( C/ B)