Central Bank of Jordan Decision on Supervisory Forms under IFRS 4 for 2024

Central Bank of Jordan Reference No.: 18/2/8182 Date: 29/7/1446 AH Corresponding to: 21/1/2024 AD

Dear Insurance Companies,

Based on the provisions of paragraph (b) of Article No. (109) of the Insurance Activities Regulation Law No. 12 of 2021, I hereby decide the following:

A. The insurance company shall provide the Central Bank with Attachment No. (1) or Attachment No. (2) attached to this decision, as appropriate, within a period not exceeding two months from the end of the financial year at the latest.

B. In implementation of the provisions of paragraph (a) of this decision, the insurance company is obligated to provide the Central Bank with the attached attachments after they have been approved and signed by the company's external auditor.

C. For the purposes of these attachments, the company shall observe the following:

1. The unearned premium reserve for general insurance business shall be calculated based on the number of days remaining until the end of the insurance contract period. For this purpose, the number of days in a year is considered (365) days. Exception to this is the marine and transport insurance branch included in the marine insurance and transport license, where the unearned premium reserve for it is calculated based on the premiums subscribed for active contracts at the date of preparation of the financial statements submitted in accordance with the provisions of the Law, regulations, and instructions issued pursuant thereto.

2. The unearned premium reserve for life insurance business shall be calculated based on the company's experience and estimates.

3. The incurred claims reserve under settlement shall be calculated by determining the total expected costs for each claim individually.

4. The deficiency in premiums reserve and the incurred claims reserve shall be calculated based on the company's experience and estimates, without reducing the value of the claims reserve resulting from the calculation of present value.

5. The technical reserve shall be calculated in accordance with Attachment No. (3) attached to this decision.

6. Subject to the provisions of item (3) of this paragraph, the company shall observe the following:

a. Maintain a claims reserve of not less than (10%) of the total claims reserve for that insurance license obtained, except for the fire and other property damage insurance license, regardless of the reinsurance percentage of the total insurance premiums subscribed for in that license.

b. The company shall maintain a claims reserve of not less than (5%) of the total claims reserve for the fire and other property damage insurance license, regardless of the reinsurance percentage of the total insurance premiums subscribed for in that license.

c. The provisions of items (a) and (b) of this item are exempted from application for insurance contracts that are reinsured by a percentage of not less than (70%) with reinsurers classified in the first group, in accordance with the effective solvency instructions for insurance companies.

d. The actuary appointed by the insurance company shall express his opinion on the sufficiency of the technical provisions allocated in accordance with the provisions of this decision.

e. The attachments attached to this decision are considered an integral part of it and shall be read together with it.

f. This decision shall be effective from its date, and its provisions shall apply to financial statements prepared in accordance with the provisions of this decision for the year 2024, and the work of our circular No. (1216/3/17) dated 21/1/2024 is repealed.

Accept our highest respect,,,

Governor Dr. Adel Al-Sharkas

Attachments/ Attachment No. (1): Supervisory forms for insurance companies. Attachment No. (2): Supervisory forms for insurance companies licensed to practice Takaful insurance business. Attachment No. (3): Basis for calculating the technical reserve for life insurance business.

Copy to:

• Dear Jordanian Union of Insurance Companies.
• Dear External Auditors.
• Dear Actuaries.

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(Note: Pages 3 to 43 contain financial and supervisory table forms)

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Central Bank of Jordan Attachment (3) Basis for calculating the technical reserve for life insurance business

First: Principles for determining the technical reserve

1. The value of the technical reserve for life insurance liabilities shall be determined based on actuarial principles that take into account reasonable expectations of life insurance policyholders and the liabilities arising from these expectations, based on conservative assumptions including adequate margins for any expected negative deviations.

2. When determining the technical reserve, all potential liabilities specified according to the terms of each active policy shall be considered, in addition to considering the value of insurance premiums due after the valuation date.

3. When determining the value of the technical reserve, the following matters shall be considered as a minimum:

a. All guaranteed benefits.

b. All profits or surpluses due to policyholders according to the policy, whether collectively or individually, including declared, earned, or allocated profits or surpluses.

c. All options available to the policyholder according to the policy provisions.

d. Expenses, including initial and future commissions.

e. All allowances and deductions.

f. Any rights under reinsurance.

g. Future profits or surpluses for policyholders declared through any policy-related bulletins.

Second: Method of calculating the technical reserve

1. The value of the technical reserve shall be determined separately for each insurance policy through future calculations, and the continuity of the method of calculating this reserve and the assumptions used shall be considered from year to year, except in the following cases:

a. Retrospective calculation in case it is not possible to apply the future method to a specific type of policy or benefit, or in case it is proven that the value resulting from the technical reserve will not be less than required through applying future calculations.

b. Applying appropriate estimates or generalizations only if they lead to a result equal to or higher than the separate calculations for each policy.

c. Recording an additional reserve on a gross basis to face general non-individual risks, when necessary.

2. In calculating the technical reserve for policies where the policyholder participates in profits or surpluses, the following shall be considered as a minimum:

a. The value of policy premiums.

b. Investments corresponding to liabilities arising from the policies.

(Note: Pages 45-48 contain additional details regarding valuation policies, future premiums, acquisition costs, interest rates, mortality and morbidity rates, expenses, future profits or surpluses, additional benefits, and investment-linked policy benefits)