Insurance Business (Companies Accounts) Regulations, 2000 (companiesaccounts)

Suppliment tal-Gav.etta tal-Gvern ta' Malta, Nru. 16,957, 13 ta' Gunju, 2000

Taqsima B

INSURANCE BUSINESS (COMPANIES ACCOUNTS) REGULATIONS,

Formation expenses

Development costs

(Regulation 4)

MODIFICATIONS OF THE FIRST SCHEDULE TO THE REGULATIONS

FOR PURPOSES OF PROVISO TO REGULATION 4 THEREOF

1. In this Schedule, "the Schedule" means the First Schedule to the regulations.

2. For the purposes of the proviso to regulation 4 of the regulations,

"modification" -

(a) in relation to a balance sheet format, shall mean a concise version of the

balance sheet, showing only those items to which a letter or Roman number is assigned

in the balance sheet format set out immediately following paragraph 15 of the Schedule

but such version shall, in all other respects, correspond to the full balance sheet;

(b) in relation to a profit and loss account format, shall mean a concise version

of the profit and loss account, showing only those items under sub-heading III ( Non-

technical account) to which an Arabic number is assigned in the profit and loss account

format set out immediately following paragraph 18 of the Schedule;

(c) in relation to notes to the accounts, shall mean a concise version of the

notes to the accounts contained in Title ill of the Schedule set out immediately following

paragraph 53 of the Schedule, omitting the disclosures set out in sub-paragraphs (d)

and (i) to (q) of paragraph 54 of the Schedule. The notes to the accounts shall however

disclose the information specified in sub-paragraph (i) of the said paragraph 54 in total

for all the items concerned.

Concessions, patents, licences, trade marks and similar rights

and assets (2)

4. Goodwill (3)

(Regulation 5)

CONSOLIDATED ACCOUNTS

TITLE I - THE FOURTH SCHEDULE TO THE COMPANIES ACT, 1995

TO APPLY THE FIRST SCHEDULE TO THE REGULATIONS WITH

MODIFICATIONS

1. In this Schedule "the Schedule" means the Fourth Schedule to the Companies

Act, 1995.

2. Paragraph 1 of the Schedule shall apply as follows -

(a) sub-paragraph (1) thereof shall apply as if reference to the provisions

of the "Third Schedule" were a reference to the provisions of the" First Schedule to the

regulations modified as mentioned in Title n of the Third Schedule thereto";

(b)

sub-paragraph (2) thereof shall apply as if-

(i) for the words "without prejudice to sections 168 and 169 of this

Act and to the provisions of this Schedule" there were substituted the words

"without prejudice to the provisions of the Schedule as modified by the Third

Schedule to the regulations";

(ii) reference to the provisions of "Part I of the Third Schedule" were

a reference to the provisions of the "First Schedule to the regulations as

modified by Title n of the Third Schedule thereto"; and

(c)

sub-paragraph (3) thereof were omitted.

3. Sub-paragraph (5) of paragraph 3 of the Schedule shall apply as if the words

"by more than three months," were substituted by the words "by more than six months,".

4. Paragraph 4 of the Schedule shall apply as if immediately after sub-paragraph

(2) thereof there were added the following new sub-paragraphs -

"(2A) Sub-paragraph (2) of this paragraph shall not apply to those liabilities

items the valuation of which by the undertakings included in a consolidation

is based on the application of provisions applying only to authorised

companies, nor to those assets items changes in the values of which also

affect or establish policyholders' rights.

(2B) Where sub-paragraph (2A) of this paragraph applies, that fact shall

be disclosed in the notes to the consolidated accounts.".

5. Paragraph 7 of the Schedule shall apply as if -

(a) Sub-paragraph (4) thereof were substituted by the following sub-

paragraph

"(4) Sub-paragraphs (2) and (3) of this paragraph need not be complied

with -

(a) where a transaction has been concluded according to normal

market conditions and a policyholder has rights in respect of that transaction,

or

(b) if the amounts concerned are not material for the purpose of giving

a true and fair view."; and

(c) immediately after sub-paragraph (4) thereof there were added the

following new sub-paragraph

"(4A) Where advantage is taken of indent (a) of sub-paragraph (4) of this

paragraph, that fact shall be disclosed in the notes to the consolidated

accounts, and where the transaction in question has a material effect on the

assets, liabilities, financial position and profit or loss of all the undertakings

included in the consolidation, that fact shall be so disclosed.".

Sub-paragraph (6) of paragraph 10 of the Schedule shall apply as if for the

6. words "paragraph 19 of the Third Schedule." there were substituted the words

"paragraph 28 of the First Schedule to the regulations.".

7. Paragraph 17 of the Schedule shall apply as if for the words "and the Registrar

agrees" there were substituted the words "and the Registrar, with the concurrence of

the Centre, agrees".

8. Sub-paragraphs (6) and (10) of paragraph 21 of the Schedule shall respectively

apply as if reference to "the Third Schedule to this Act" were a reference to the "First

Schedule to the regulations".

9. Sub-paragraph (9) of paragraph 22 of the Schedule shall apply as if reference

to "the Third Schedule to this Act" were a reference to the "First Schedule to the

regulations.".

1O. Sub-paragraph (1) of paragraph 23 of the Schedule shall apply as if

immediately after the words "filed with the Registrar" there were added the words

"and the Centre".

11. Sub-paragraph (1) of paragraph 24 of the Schedule shall apply as if the

words "and the Registrar agrees" there were substituted the words "and the Registrar,

with the concurrence of the Centre, agrees".

TITLE II - MODIFICATIONS OF THE FIRST SCHEDULE TO THE

REGULATIONS FOR PURPOSES OF TITLE I OF THIS SCHEDULE

1. For the purposes ofTitle I of this Schedule, the First Schedule to the regulations

shall be modified as follows.

2. The information required by paragraph 16 thereof need not be given.

3. In the case of general business, investment income and charges may be

disclosed in the non-technical account rather than in the technical account.

4. In the case of subsidiary undertakings which are not authorised to carry on

long term business in or from Malta, notes (8) and (9) to the profit and loss account

format shall have effect as if references to investment income and charges arising in

the long term fund or to investments attributed to the long term fund were references to

investment income and charges or (as the case may be) investments relating to long

term business.

5. In the case of subsidiary undertakings whose head office is not in Malta, the

computation required by paragraph 46 thereof shall be made annually by an actuary or

other specialist in the field on the basis of recognised actuarial methods.

6. The information required by sub-paragraphs (k), (1), (m) and (n) of paragraph

54 thereof need not be shown.

(Regulation 7)

FINANCIAL STATEMENTS IN ABRIDGED FORM OF AUTHORISED

COMPANIES AND GROUPS

TITLE I - FORM AND CONTENT

1. (1)

The financial statements in abridged fonn shall, as a minimum, show -

(a) the company's balance sheet showing the items listed in the balance

sheet fonnat set out immediately following paragraph 2 of this Schedule;

(b) the company's profit and loss account showing the items listed in

the profit and loss account fonnat set out immediately following the balance

sheet fonnat referred to in indent (a) of this sub-paragraph; and

(c)

the auditor's report to the members of the company.

(2) The provisions of indents (a) and (b) of sub-paragraph (1) of this

paragraph shall not apply wHh respect to a company whose head office is in a country

outside Malta where the Centre has approved in writing alternative arrangements which

do not detract materially from the objects of that sub-paragraph, and such arrangements

have been carried out.

(3) Balance sheet fonnat items and profit and loss account fonnat items

shall, as far as practicable, retain the order of preference given in their respective

fonnat.

2. (1) Any item required to be shown in a company's balance sheet or profit

and loss account in accordance with sub-paragraph (1) of paragraph 1 of this Schedule

may be shown in greater detail than so required.

(2) In respect of every item shown in the company's balance sheet or profit

and loss account, there shall also be shown the corresponding amount for the accounting

period immediately preceding that to which the accounts relate.

(3) Save where there is a corresponding item for the preceding accounting

period, a balance sheet or profit and loss account item for which there is no amount

shall not be shown.

Balance Sheet Format

ASSETS

Called up share capital not paid

Intangible assets

Investments

Assets held to cover linked liabilities

Debtors

Other assets

Prepayments and accrued income

LIABILITIES

Capital and reserves

Subordinated liabilities

Technical provisions

Technical provisions for linked liabilities

Provisions for other risks and charges

Deposits received from reinsurers

Creditors

Accruals and deferred income

Profit and Loss Account Format

Balance on the general business technical account

Balance on the long term business technical account

Investment income

Allocated investment return transferredfrom the long term business technical account

Investfnentcharges

Allocated investlnent return transferred to the general business technical account

Other incofne

Other charges, including value adjustlnents

Tax on profit or loss on ordinary activities

Profit or loss on ordinary activities after tax

Extraordinary incofne

Extraordinary charges

Extraordinary profit or loss

Tax on extraordinary profit or loss

Other taxes not shown under the preceding itefns

Profit or loss for the financial year

TITLE II - GENERAL INFORMATION

1. The information mentioned in the following paragraphs (and no other) shall

be published by a company together with the financial statements in abridged form.

2. A statement that -

(a) the company is authorised by the Malta Financial Services Centre to

carry on long term business or general business of insurance under the Insurance

Business Act, 1998; and

(b) the financial statements in abridged form are published in accordance

with section 20 of that Act.

3. The following particulars shall also be stated -

(a) in the case of a company whose head office is in Malta, the name of the

company and its registered office;

(b) in the case of a company whose head office is in a country outside

Malta, other than Lloyd's

(i)

the name of the company;

(ii) the registered office of the company in the country where the

company is registered, incorporated or constituted;

(iii)

the registered branch office of the company in Malta;

(iv)

the name and address of the company's representative in Malta;

(v) the name and registered office of the company's authorised

insurance agent or agents in Malta;

(c)

in the case of Lloyd's

(i) a statement that Lloyd's is the society and corporation incorporated

by Lloyd's Act, 1871, of the United Kingdom, and regulated by or under

Lloyd's Acts, 1871 to 1982, of the United Kingdom or any other law from

time to time amending or re-enacting the same;

the registered office of the society and corporation;

(ii)

(iii) a statement that Lloyd's is recognised for the purposes of the

Insurance Business Act, 1998 as a Recognised Insurance Body;

(iv)

the name and address of Lloyd's representative in Malta;

(v) a statement that members of Lloyd's carry on the business of

insurance in Malta through authorised insurance agents or with enrolled

insurance brokers.

4. A statement that -

(a) the audited financial statements of the company for that financial year

are exhibited in Malta throughout the following twelve months in the branches,

agencies and offices of the company and are available for public inspection during

the normal office hours of the company or its agent or agents, as the case may

be; and

(b) copies of such audited financial statements are available for purchase

from the company's offices.

In the case of a company whose head office is in Malta, a statement that -

5. (a) the audited financial statements of the company for that financial year

are also available for public inspection and purchase from the Registrar of

Companies; and

(b) such statements are also exhibited and available for public inspection

and purchase from the company's branches, agencies and offices outside Malta,

if such be the case.

Payments on account

C. Investments

I.

Land & buildings (including all rights on immovables) (4)

II.

Investments in group undertakings and participating interests

1. Shares in group undertakings

2. Debt securities issued by, and loans to, group undertakings

3. Participating interests

4. Debt securities issued by, and loans to, undertakings in which

the company has a participating interest

Other financial investments

1. Shares and other variable-yield securities and units in unit trusts

2. Debt securities and other fixed income securities (5)

3. Participation in investment pools (6)

4. Loans secured by mortgages (7)

5. Other loans (7)

Deposits with banks or credit institutions (8)

Other (9)

Deposits with ceding undertakings (10)

D. Assets held to cover linked liabilities (11)

Da. Reinsurers' share of technical provisions (12)

1. Provision for unearned premiums

2. Long term business provision

3. Claims outstanding

4. Provision for bonuses and rebates

5. Other technical provisions

6. Technical provisions for unit-linked liabilities

E. Debtors ( 13)

I.

Debtors arising out of direct insurance operations

1. Policy holders

2. Intermediaries

II.

Debtors arising out of reinsurance operations

III.

Other debtors

IV.

Called up share capital not paid ( 1)

F. Other assets

I.

Tangible assets

1. Plant and machinery

2. Fixtures, fittings, tools and equipment

3. Payments on account (other than deposits paid on land and buildings) and

assets (other than buildings) in course of construction

II.

Stocks

1. Raw materials and consumables

2. Work in progress

3. Finished goods and goods for resale

4. Payments on account

IV.

Own shares (14)

V.

Other (15)

G. Prepayments and accrued income

I.

Accrued interest and rent (16)

II. Deferred acquisition costs (17)

III. Other prepayments and accrued income

LIABILITIES

A. Capital and reserves

I.

Called up share capital or equivalent funds

II.

Share premium account

III.

Revaluation reserve

IV.

Reserves

1. Capital redemption reserve

2. Reserve for own shares

3. Reserves provided for by the articles of association

4. Other reserves

V.

Profit and loss account

B. Subordinated liabilities (18)

Ba. Fundfor future appropriations (19)

C. Technical provisions

1. Provision for unearned premiums (20)

(a) gross amount

(b) reinsurance amount (12)

2. Long term business provision (20) (21) (26)

(a) gross amount

(b) reinsurance amount (12)

3. Claims outstanding (22)

(a) gross amount

(b) reinsurance amount (12)

4. Provision for bonuses and rebates (23)

(a) gross amount

(b) reinsurance amount (12)

5. Equalisation provision (24)

6. Other technical provisions (25)

(a) gross amount

(b) reinsurance amount (12)

D. Technical provisions for linked liabilities (26)

(a) gross amount

(b) reinsurance amount (12)

E. Provisions for other risks and charges (27)

1. Provisions for pensions and similar obligations

2. Provisions for taxation

3. Other provisions

F. Deposits receivedfrom reinsurers (28)

G. Creditors (29)

I.

Creditors arising out of direct insurance operations

II.

Creditors arising out of reinsurance operations

III.

Debenture loans (30)

IV.

Amounts owed to banks or credit institutions

V.

Other creditors including taxation and social security

H. Accruals and deferred income

Notes on the balance sheet format

( 1) Called up share capital not paid

(Assets items A and E.IY)

This item may be shown in either of the positions given in the format.

(2) Concessions, patents, licences, trade marks and similar rights and assets

(Assets item B.3)

Amounts in respect of assets shall only be included in a company's balance sheet

under this item if either-

(a) the assets were acquired for valuable consideration and are not required

to be shown under goodwill; or

(b)

the assets in question were created by the company itself.

(3) Goodwill

(Assets item BA)

Amounts representing goodwill shall only be included to the extent that the

goodwill was acquired for valuable consideration.

(4) Land and buildings

(Assets item C.I)

The amount of any land and buildings occupied by the company for its own

activities shall be shown separately in the notes to the accounts.

(5) Debt securities and other fixed income securities

(Assets item C.III.2)

This item shall comprise transferable debt securities and any other transferable

fixed income securities issued by banks or credit institutions, other undertakings or

public bodies, in so far as they are not covered by Assets item C.II.2 or C.llA.

Securities bearing interest rates that vary in accordance with specific factors, for

example the interest rate on the inter-bank market or on the Euromarket, shall also be

regarded as debt securities and other fixed income securities and so be included under

this item.

(6) Participation in investment pools

(Assets item C.III.3)

This item shall comprise shares held by the company in joint investments

constituted by several undertakings or pension funds, the management of which has

been entrusted to one of those undertakings or to one of those pension funds.

(7) Loans secured by mortgages and other loans

(Assets items C.III.4 and C.III.5)

Loans to policy holders for which the policy is the main security shall be included

under "Other loans" and their amount shall be disclosed in the notes to the accounts.

Loans secured by mortgage shall be shown as such even where they are also secured

by insurance policies. Where the amount of "Other loans" not secured by policies is

material, an appropriate breakdown shall be given in the notes to the accounts.

(8) Deposits with banks or credit institutions

(Assets item CIII.6)

This item shall comprise sums the withdrawal of which is subject to a time

restriction. Sums deposited with no such restriction shall be shown under Assets item

F.IlI even if they bear interest.

(9) Other

(Assets item CIlI.7)

This item shall comprise those investments which are not covered by Assets items

c.m.l to 6. Where the amount of such investments is significant, they must be disclosed

in the notes to the accounts.

(10) Deposits with ceding undertakings

(Assets item C IV)

Where the company accepts reinsurance this item shall comprise amounts, owed

by the ceding undertakings and corresponding to guarantees, which are deposited with

those ceding undertakings or with third parties or which are retained by those

undertakings.

These amounts may not be combined with other amounts owed by the ceding

insurer to the reinsurer or set off against amounts owed by the reinsurer to the ceding

Insurer.

Securities deposited with ceding undertakings or third parties which remain the

property of the company shall be entered in the company's accounts as an investment,

under the appropriate item.

(11) Assets held to cover linked liabilities

(Assets item D)

In respect of long term business, this item shall comprise investments made

pursuant to long term policies under which the benefits payable to the policyholder are

wholly or partly to be determined by reference to the value of, or the income from,

property of any description (whether or not specified in the contract) or by reference to

fluctuations in, or in an index of, the value of property of any description (whether or

not so specified).

This item shall also comprise investments which are held on behalf ofthe members

of a tontine and are intended for distribution among them.

(12) Reinsurance amounts

(Assets item Da: Liabilities items C.l(b), 2(b), 3(b), 4(b) and 6(b) and D(b»

The reinsurance amounts may be shown either under Assets item Da or under

Liabilities items C.l (b), 2(b), 3(b), 4(b) and 6(b) andD(b).

The reinsurance amounts shall comprise the actual or estimated amounts which,

under contractual reinsurance arrangements, are deducted from the gross amounts of

technical provisions.

As regards the provisions for unearned premiums, the reinsurance amounts shall

be calculated according to the methods referred to in paragraph 44 of this Schedule or

in accordance with the terms of the reinsurance policy.

(13) Debtors

(Assets item E)

Amounts owed by group undertakings and undertakings in which the company

has a participating interest shall be shown separately as sub-items of Assets items E.I,

II and III.

(14) Own shares

(Assets item EIV)

The nominal value of the shares shall be shown separately under this item.

(15) Other

(Assets item EV)

This item shall comprise those assets which are not covered by Assets items EI to

IV. Where such assets are material they must be disclosed in the notes to the accounts.

(16) Accrued interest and rent

(Assets item GJ)

This item shall comprise those items that represent interest and rent that have

been earned up to the balance sheet date but have not yet become receivable.

(17) Deferred acquisition costs

(Assets item G.II)

This item shall comprise the costs of acquiring insurance policies which are

incurred during a financial year but relate to a subsequent financial year ("deferred

acquisition costs"), except in so far as -

(a) allowance has been made in the computation of the long term business

provision made under paragraph 46 of this Schedule and shown under Liabilities

item C2 or D in the balance sheet, for

(i)

the explicit recognition of such costs, or

(ii) the implicit recognition of such costs by virtue of the anticipation

of future income from which such costs may prudently be expected to be

recovered, or

(b) allowance has been made for such costs in respect of general business

policies by a deduction from the provision for unearned premiums made under

paragraph 44 in this Schedule and shown under Liabilities item C.I in the balance

sheet.

Deferred acquisition costs arising in general business shall be distinguished from

those arising in long term business.

In the case of general business, the amount of any deferred acquisition costs shall

be established on a basis compatible with that used for unearned premiums.

There shall be disclosed in the notes to the accounts -

(a) how the deferral of acquisition costs has been treated (unless otherwise

expressly stated in the accounts), and

(b) where such costs are included as a deduction from the provisions at

Liabilities item C.l, the amount of such deduction, or

(c) where the actuarial method used in the calculation of the provisions at

Liabilities item C.2 or D has made allowance for the explicit recognition of such

costs, the amount of the costs so recognised.

(18) Subordinated liabilities

(Liabilities item B)

This item shall comprise all liabilities in respect of which there is a contractual

obligation that, in the event of winding up or of bankruptcy, they are to be repaid only

after the claims of all other creditors have been met (whether or not they are represented

by certificates).

(19) Fund for future appropriations

(Liablilites item Ba)

This item shall comprise all funds the allocation of which either to policyholders

or to shareholders has not been determined by the end of the financial year.

Transfers to and from this item shall be shown in item II.12a in the profit and loss

account.

(20) Provision for unearned premiums

(Liabilities item c.l)

In the case of long term business the provision for unearned premiums may be

included in Liabilities item C.2 rather than in this item.

The provision for unearned premiums shall comprise the amount representing

that part of gross premiums written which is estimated to be earned in the following

financial year or in subsequent financial years.

(21) Long term business provision

(Liabilities item C.2)

This item shall comprise the actuarially estimated value of the company's liabilities

(excluding technical provisions included in Liabilities item D), including bonuses

already declared and after deducting the actuarial value of future premiums.

This item shall also comprise claims incurred but not reported, plus the estimated

costs of settling such claims.

(22) Claims outstanding

(Liabilities item C.3)

This item shall comprise the total estimated ultimate cost to the company of settling

all claims arising from events which have occurred up to the end of the financial year

(including, in the case of general business, claims incurred but not reported) less amounts

already paid in respect of such claims.

(23) Provision for bonuses and rebates

(Liabilities item CA)

This item shall comprise amounts intended for policy holders or contract

beneficiaries by way of bonuses and rebates as defined in Note (5) on the profit and

loss account format to the extent that such amounts have not been credited to policy

holders or contract beneficiaries or included in Liabilities item C.2.

(24) Equalisation provision

(Liabilities item C.S)

This item shall comprise the amount of any reserve maintained by the company

under subsection (7) of section 17 of the Act.

A company which otherwise constitutes reserves to equalise fluctuations in loss

ratios in future years or to provide for special risks shall disclose that fact in the notes

to the accounts.

(25) Other technical provisions

(Liabilities item C.6)

This item shall comprise, inter alia, the provision for unexpired risks as defined in

paragraph (1) of regulation 2 of the regulations. Where the amount of the provision for

unexpired risks is significant, it shall be disclosed separately either in the balance

sheet or in the notes to the accounts.

(26) Technical provisions for linked liabilities

(Liabilities item D)

This item shall comprise technical provisions constituted to cover liabilities relating

to investment in the context of long term policies under which the benefits payable to

policyholders are wholly or partly to be determined by reference to the value of, or the

income from, property of any description (whether or not specified in the contract) or

by reference to fluctuations in, or in an index of, the vaiue ofproperty of any description

(whether or not so specified).

Any additional technical provisions constituted to cover death risks, operating

expenses or other risks (such as benefits payable at the maturity date or guaranteed

surrender values) shall be included under Liabilities item C.2.

This item shall also comprise technical provisions representing the obligations of

a tontine's organiser in relation to its members.

(27) Provisions for other risks and charges

(Liabilities item E)

Provisions for other risks and charges may not exceed in amount the sums which

are necessary.

The provisions shown under "Other Provisions" must be disclosed in the notes on

the accounts if they are material.

(28) Deposits received from reinsurers

(Liabilities item F)

Where the company cedes reinsurance, this item shall comprise amounts deposited

by or withheld from other insurance undertakings under reinsurance contracts. These

amounts may not be merged with other amounts owed to or by those other undertakings.

Where the company cedes reinsurance and has received as a deposit securities

which have been transferred to its ownership, this item shall comprise the amount

owed by the company by virtue of the deposit.

(29) Creditors

(Liabilities item G)

Amounts owed to group undertakings and undertakings in which the company

has a participating interest shall be shown separately as sub-items.

(30) Debenture loans

(Liabilities item G.III)

The amount of any convertible loans shall be shown separately.

Special rules for balance sheet format

Additional items

16 (1) Every balance sheet of a company which carries on long term business

shall show separately as an additional item the aggregate of any amounts included in

Liabilities item A (capital and reserves) which are required not to be treated as realised

profits under regulation 6 of the regulations.

(2) A company which carries on long tenn business shall show separately,

in the balance sheet or in the notes to the accounts, the total amount ofassets representing

the long tenn fund valued in accordance with the provisions of this Schedule.

Managedfunds

17 (1) For the purposes of this paragraph "managed funds" are funds of a

group pension fund -

(a)

which fall within Class VII of the Second Schedule to the Act,

and

(b) which the company administers in its own name but on behalf of

others, and

(c)

to which it has legal title.

(2) The company shall, in any case where assets and liabilities arising in

respect of managed funds fall to be treated as assets and liabilities of the company,

adopt the following accounting treatment: assets and liabilities representing managed

funds are to be included in the company's balance sheet, with the notes to the accounts

disclosing the total amount included with respect to such assets and liabilities in the

balance sheet and showing the amount included under each relevant balance sheet

item in respect of such assets or (as the case may be) liabilities.

Deferred acquisition costs

The costs of acquiring insurance policies which are incurred during a fmancial

year but which relate to a subsequent financial year shall be deferred in a manner

specified in Note (17) on the balance sheet fonnat.

Profit and loss account format

1. Technical account - General business

1. Earned premiums, net of reinsurance

(a)

gross premiums written (1)

(b)

outward reinsurance premiums (2)

(c)

change in the gross provision for unearned premiums

(d)

change in the provision for unearned premiums, reinsurers' share

2. Allocated investment return transferred from the non-technical account (item

III.6) (10)

2a.

Investment income (8) (10)

(a) income from participating interests, with a separate indication of that

derived from group undertakings

(b) income from other investments, with a separte indication of that derived

from group undertakings

(aa)

income from land and buildings

(bb)

income from other investments

(c)

value re-adjustments on investments

(d)

gains on the realisation of investments

3. Other technical income, net of reinsurance

4. Claims incurred, net of reinsurance (4)

(a)

claims paid

(aa)

gross amount

(bb)

reinsurers' share

(b)

change in the provision for claims

(aa)

gross amount

(bb)

reinsurers' share

5. Changes in other technical provisions, net of reinsurance, not shown under

other headings

6. Bonuses and rebates, net of reinsurance (5)

7. Net operating expenses

(a)

acquisition costs (6)

(b)

change in deferred acquisition costs

(c)

administrative expenses (7)

(d)

reinsurance commissions and profit participation

Other technical charges, net of reinsurance

8. Investment expenses and charges (8)

(a)

investment management expenses, including interest

(b)

value adjustments on investments

(c)

losses on the realisation of investments

Change in the equalisation provision

9.

10. Sub-total (balance on the technical account for general business) (item ID.1)

Technical account - Long term business

1. Earned premiums, net of reinsurance

(a)

gross premiums written (1)

(b)

outward reinsurance premiums (2)

(c)

change in the provision for unearned premiums, net of reinsurance (3)

2. Investment income (8) (10)

(a) income from participating interests, with a separate indication of that

derived from group undertakings

income from other investments, with a separate indication of that derived

(b)

from group undertakings

(aa)

income from land and buildings

(bb)

income from other investments

(c)

value re-adjustments on investments

(d)

gains on the realisation of investments

3. Unrealised gains on investments (9)

4. Other technical income, net of reinsurance

5. Claims incurred, net of reinsurance (4)

(a)

claims paid

(aa)

gross amount

(bb)

reinsurers' share

(b)

change in the provision for claims

(aa)

gross amount

(bb)

reinsurers' share

6. Change in other technical provisions, net of reinsurance, not shown under

other headings

(a)

long term business provision, net of reinsurance (3)

(aa)

gross amount

(bb)

reinsurers' share

(b)

other technical provisions, net of reinsurance

7. Bonuses and rebates, net of reinsurance (5)

8. Net operating expenses

(a)

acquisition costs (6)

(b)

change in deferred acquisition costs

(c)

administrative expenses (7)

(d)

reinsurance commissions and profit participation

9. Investment charges (8)

(a)

investment management charges, including interest

(b)

value adjustments on investments

(c)

losses on the realisation of investments

10. Unrealised losses on investments (9)

11. Other technical charges, net of reinsurance

11 a.

Tax attributable to the long tenn business

12. Allocated investment return transferred to the non-technical account (item

III. 4) (10)

12a.

Tranfers to or from the fund for future appropriations

13. Sub-total (balance on the technical account - long term business)

(item III. 2)

.

III.

Non-technical account

1. Balance on the general business technical account (item 1. 10)

2. Balance on the long tenn business technical account (item II. 13)

3. Investment income (8)

(a) income from participating interests,

with a separate indication of that

derived from group undertakings

(b) income from other investments, with a separate indication of that derived

from group undertakings

(aa)

income from land and buildings

(bb)

income from other investments

(c)

value re-adjustments on investments

(d)

gains on the realisation of investments

3a.

Unrealised gains on investments (9)

4. Allocated investment return transferred from the long tenn business technical

account (item II.12) (10)

5. Investment charges (8)

(a)

investment management charges, including interest

(b)

value adjustments on investments

(c)

losses on the realisation of investments

5a.

Unrealised losses on investments (9)

6. Allocated investment return transferred to the general business technical

account (item 1.2) (10)

7. Other income

8. Other charges, including value adjustments

8a.

Profit or loss on ordinary activities before tax

9. Tax on profit or loss on ordinary activities

10. Profit or loss on ordinary activities after tax

11. Extraordinary income

12. Extraordinary charges

13. Extraordinary profit or loss

14. Tax on extraordinary profit or loss

15. Other taxes not shown under the preceding items

16. Profit or loss for the financial year

Notes on the profit and loss account format

(1) Gross premiums written

(General business technical account: item I. 1.(a)

Long term business technical account: item IT. 1.(a))

This item shall comprise all amounts due during the financial year in respect of

contracts of insurance entered into regardless of the fact that such amounts may relate

in whole or in part to a later financial year, and shall include inter alia-

(a) premiums yet to be determined, where the premium calculation can be

done only at the end of the year;

(b) single premiums, including annuity premiums, and, in long term

business, single premiums resulting from bonus and rebate provisions in so far as

they must be considered as premiums under the terms of the contract;

(c) additional premiums in the case of half-yearly, quarterly or monthly

payments and additional payments from policy holders for expenses borne by the

company;

(d)

in the case of co-insurance, the company's portion of total premiums;

(e) reinsurance premiums due from ceding and retroceding insurance

undertakings, including portfolio entries,

after deduction of cancellations and portfolio withdrawals credited to ceding and

retroceding insurance undertakings.

The above amounts shall not include the amounts of taxes or duties levied with

premiums.

(2) Outward reinsurance premiums

(General business technical account: item LI.(b)

Long term business technical account: item II.I.(b»

This item shall comprise all premiums paid or payable in respect of outward

reinsurance contracts entered into by the company. Portfolio entries payable on the

conclusion or amendment of. outward reinsurance contracts shall be added; portfolio

withdrawals receivable must be deducted.

(3) Change in the provision for unearned premiums, net of reinsurance

(Long term business technical account: items II.1.(c) and II.6.(a»

In the case of long term business, the change in unearned premiums may be

included either in item II.1.(c) or in item II.6.(a) of the long term business technical

account.

(4) Claims incurred, net of reinsurance

(General business technical account: item 1.4

Long term business technical account: item II.5)

This item shall comprise all payments made in respect of the financial year with

the addition of the provision for claims (but after deducting the provision for claims

for the preceding financial year).

These amounts shall include annuities, surrenders, entries and withdrawals of

loss provisions to and from ceding insurance undertakings and reinsurers and external

and internal claims management costs and charges for claims incurred but not reported

such as are referred to in sub-paragraph (2) paragraph 47 and paragraph 49 of this

Schedule.

Sums recoverable on the basis of subrogation and salvage (within the meaning of

paragraph 47 of this Schedule) shall be deducted.

Where the difference between -

(a) the loss provision made at the beginning of the year for outstanding

claims incurred in previous years, and

(b) the payments made during the year on account of claims incurred in

previous years and the loss provision shown at the end of the year for such

outstanding claims,

is material, it shall be shown in the notes to the accounts, broken down by category and

amount.

(5) Bonuses and rebates, net of reinsurance·

(General business technical account: item 1.6

Long term business technical account: item II.7)

Bonuses shall comprise all amounts chargeable for the financial year which are

paid or payable to policyholders and other insured parties or provided for their benefit,

including amounts used to increase technical provisions or applied to the reduction of

future premiums, to the extent that such amounts represent an allocation of surplus or

profit arising on business as a whole or a section of business, after deduction of amounts

provided in previous years which are no longer required.

Rebates shall comprise such amounts to the extent that they represent a partial

refund of premiums resulting from the experience of individual contracts.

Where material, the amount charged for bonuses and that charged for rebates

shall be disclosed separately in the notes to the accounts.

(6) Acquisition costs

(General business technical account: item I.7.(a)

Long term business technical account: items II.8.(a))

This item shall comprise the costs arising from the conclusion of contracts of

insurance. They shall cover both direct costs, such as acquisition commissions or the

cost of drawing up the insurance document or including the contract of insurance in

the portfolio, and indirect costs, such as advertising costs or the administrative expenses

connected with the processing of proposals and the issuing of policies.

In the case of long term business, policy renewal commissions shall be included

under item 1I.8.(c) in the long term business technical account.

(7) Administrative expenses

(General business technical account: item I.7.(c)

Long term business technical account: item n.8.(c))

This item shall include the costs arising from premium collection, portfolio

administration, handling of bonuses and rebates, and inward and outward reinsurance.

They shall in particular include staff costs and depreciation provisions in respect of

office furniture and equipment in so far as these need not be shown under acquisition

costs, claims incurred or investment charges.

Item 1I.8.(c) shall also include policy renewal commissions.

(8) Investment income and charges

(General business technical account: items I.2a and 8a

Long term business technic;al account: items 11.2 and 9

Non-technical account: items 111.3 and 5)

Investment income and charges shall, to the extent that they arise in the long term

fund, be disclosed in the long term business technical accounts. Other investment

income and charges shall either be disclosed in the non-technical account or attributed

between the appropriate technical and non-technical accounts. Where the company

makes such an attribution it shall disclose the basis for it in the notes to the accounts.

(9) Unrealised gains and losses on investments

(Long term business technical account: items 11.3 and 10)

Non-technical account: items 11I.3a and 5a)

In the case of investments attributed to the long term business fund, the difference

between the valuation of the investments and their purchase price or production cost

or, if they have previously been valued, their valuation as at the last balance sheet date,

may be disclosed (in whole or in part) in item 11.3 or 11.10 (as the case may be) of the

long term business technical account, and in the case of investments shown as assets

under Assets item D (assets held to cover linked liabilities) shall be so disclosed.

In the case of other investments, the difference between the valuation of the

investments and their purchase price or, if they have previously been valued, their

valuation as at the last balance sheet date, may be disclosed (in whole or in part) in

item rn.3a or 11I.5a (as the case may require) of the non-technical account.

(10) Allocated investment return

(General business technical account: item 1.2

Long term business technical account: item 1I.12

Non-technical account: items rnA and 6)

The allocated return may be transferred from one part of the profit and loss account

to another.

Where part of the investment return is transferred to the general business technical

account, the transfer from the non-technical account shall be deducted from item 111.6

and added to item 1.2.

Where part of the investment return disclosed in the long term business technical

account is transferred to the non-technical account, the transfer to the non-technical

account shall be deducted from item II. 12 and added to item 1I1.4.

The reasons for such transfers (which may consist of a reference to any relevant

statutory requirement) and the bases on which they are made shall be disclosed in the

notes to the accounts.

TITLE II . ACCOUNTING PRINCIPLES AND RULES

ACCOUNTING PRINCIPLES

Items shown in the company's accounts shall be valued in accordance with

the following general principles -

(a) the company must be presumed to be carrying on its business as a going

concern;

(b) the methods of valuation must be applied consistently from one

accounting period to another;

(c)

valuation must be made on a prudent basis, and in particular

(i) subject to note (9) on the profit and loss account format, only profits

realised at the balance sheet date may be included in the profit and loss

account,

(ii) account shall be taken of all foreseeable liabilities and potential

losses arising in the course of the accounting period concerned or of a previous

one, even if such liabilities or losses become apparent only between the date

of the balance sheet and the date on which it is drawn up,

(iii) account must be taken of all depreciation whether the result of

the accounting period is a loss or a profit;

(d) account must be taken of income and charges relating to the accounting

period, irrespective of the date of receipt or payment of such income or charges;

(e)

the components of asset and liability items must be valued separately;

the opening balance sheet for each accounting period must correspond

(f)

to the closing balance sheet for the preceding accounting period.

If it appears to the directors of the company that there are special reasons

for departing from any of the principles stated above in preparing the company's

accounts in respect of any financial year they may do so, but particulars of the departure,

the reasons for it and its effect shall be given in a note to the accounts.

HISTORICAL COST ACCOUNTING RULES

Preliminary

Subject to paragraphs 32 to 41 of this Schedule, the amounts to be included

in respect of all items shown in a company's accounts shall be determined in accordance

with the rules set out in paragraphs 22 to 31 of this Schedule.

Valuation of assets

General rules

(1) Formation expenses shown as assets in the balance sheet shall be written

off within a maximum period of five years.

(2) In so far as formation expenses have not been completely written off,

no distribution of profits shall take place unless the amount of the reserves available

for distribution and profits brought forward is at least equal to that of the expenses not

written off.

(3) The amounts entered under "Formation Expenses" shall be explained

in the notes to the accounts.

Subject to any provision for depreciation or diminution in value made in

accordance with paragraph 24 or 25 of this Schedule, the amount to be included in

respect of any asset in the balance sheet format shall be its purchase price or production

(1) In the case of any asset included under Assets item B (intangible assets),

C.I (land and buildings), EI (tangible assets) or Ell (stocks) which has a limited useful

economic life, the amount of -

(a)

its purchase price or production cost; or

(b) where it is estimated that any such asset will have a residual value

at the end of the period of its useful economic life, its purchase price or

production cost less that estimated residual value,

shall be reduced by provisions for depreciation calculated to write off that amount

systematically over the period of the asset's useful economic life. Such provisions

shall be charged in the profit and loss account.

(2) The purchase price of an asset shall be determined by adding to the

actual price paid any expenses incidental to its acquisition.

(3) The production cost of an asset shall be determined by adding to the

purchase price of the raw materials and consumables used, the amount of the costs

incurred by the company which are directly attributable to the production of that asset.

(4) In addition to the costs specified in sub-paragraph (3) of this paragraph

there may be included in the production cost of an asset -

(a) a reasonable proportion of the costs incurred by the company which

are only indirectly attributable to the production of that asset, but only to the

extent that they relate to the period of production; and

(b) interest on capital borrowed to finance the production of that asset,

to the extent that it relates to the period of production. The inclusion of such

interest and the amount thereof shall be disclosed in the notes to the accounts.

(1) This paragraph applies to any asset included under Assets item B

(intangible assets), C (investments), F.I (tangible assets) or E IV (own shares).

(2) Where an asset to which this paragraph applies has diminished in value,

provisions for diminution in value may be made in respect of it and the amount to be

included in respect of it may be reduced accordingly; and any such provisions which

are not shown in the profit and loss account shall be disclosed (either separately or in

aggregate) in the notes to the accounts.

(3) Provisions for diminution in value shall be made in respect of any asset

to which this paragraph applies if the reduction in its value is expected to be permanent

(whether its useful economic life is limited or not), and the amount to be included in

respect of it shall be reduced accordingly; and any such provisions which are not shown

in the profit and loss account shall be disclosed (either separately or in aggregate) in

the notes to the accounts.

(4) Where the reasons for which any provision was made in accordance

with sub-paragraph (2) or (3) of this paragraph have ceased to apply to any extent, that

provision shall be written back to the extent that it is no longer necessary; and any

amounts written back in accordance with this sub-paragraph which are not shown in

the profit and loss account shall be disclosed (either separately or in aggregate) in the

notes to the accounts.

(1) This paragraph applies to assets included under Assets items E.I, II

and III (debtors) and F.III (cash at bank and in hand) in the balance sheet.

(2) If the net realisable value of an asset to which this paragraph applies, is

lower than its cost, the amount to be included in respect of that asset shall be the net

realisable value.

(3) Where the reasons for which any provision for diminution in value

made in accordance with sub-paragraph (2) of this paragraph have ceased to apply to

any extent, that provision shall be written back to the extent that it is no longer necessary.

Development costs

(1) Notwithstanding that amounts representing "development costs" may

be included under Assets item B (intangible assets) in the balance sheet format, an

amount may only be included in a company's balance sheet in respect of development

costs in special circumstances.

(2) If any amount is included in a company's balance sheet in respect of

development costs the following information shall be given in the notes to the accounts -

(a) the period over which the amount of those costs originally

capitalised is being or is to be written off; and

(b)

the reasons for capitalising the development costs in question.

Goodwill

(1) Where goodwill is treated as an asset the following provisions of this

paragraph shall apply.

(2) Subject to sub-paragraph (3) of this paragraph, the amount of the

consideration for any goodwill acquired by a company shall be reduced by provisions

for amortisation calculated to write off that amount systematically over a period chosen

by the directors of the company.

(3) The period chosen shall not exceed the useful economic life of the

goodwill in question.

(4) In any case where any goodwill acquired by a company is shown or

included as an asset in the company's balance sheet the period chosen for writing off

the consideration for that goodwill and the reasons for choosing that period shall be

disclosed in the notes to the accounts.

Miscellaneous and supplemental

Assets included at a fued amount

(1) Subject to the following sub-paragraph, assets which fall to be included

under Assets item EI (tangible assets) in the balance sheet format may be included at a

fixed quantity and value.

(2) Sub-paragraph (1) of this paragraph applies to assets of a kind which

are constantly being replaced, where -

(a) their overall value is not material to assessing the company's state

of affairs; and

(b) their quantity, value and composition are not subject to material

variation.

Determination of cost

(1) Subject to the qualification mentioned in sub-paragraph (3) of this

paragraph, the cost of any assets which are fungible assets may be determined by the

application of any of the methods mentioned in sub-paragraph (2) of this paragraph in

relation to any such assets of the same class.

(2)

The methods referred to in sub-paragraph (1) of this paragraph are -

(a)

the method known as "first in, first out" (FIFO);

(b)

the weighted average price method; and

(c)

any other method similar to any of the methods mentioned above.

(3) The method actually chosen for the purposes of this paragraph shall be

the one which appears to the directors to be appropriate in the circumstances of the

company.

(4)

Where in the case of any company -

(a) the purchase price or production cost of assets falling to be included

under any item shown in the company's balance sheet has been detennined by

the application of any method permitted by this paragraph; and

(b) the amount shown in respect of that item differs materially from the

relevant alternative amount given in sub-paragraph (5) of this paragraph,

the amount of that difference shall be disclosed in the notes to the accounts.

(5) Subject to sub-paragraph (6) of this paragraph, for the purposes of

indent (b) of sub-paragraph (4) of this paragraph, the relevant alternative amount, in

relation to any item shown in a company's balance sheet, is the amount which would

have been shown in respect of that item if assets of any class included under that item

at an amount determined by any method permitted by this paragraph had instead been

included at their replacement cost as at the balance sheet date.

(6) The relevant alternative amount may be determined by reference to

the most recent actual purchase price or production cost before the balance sheet date

of assets of any class included under the item in question instead of by reference to

their replacement cost as at that date, but only if the former appears to the directors of

the company to constitute the more appropriate standard of comparison in the case of

assets of that class.

Excess ofmoney owed over value received as an asset item

(1) Where the amount repayable on any debt owed by a company is greater

than the value of the consideration received in the transaction giving rise to the debt,

the amount of the difference may be treated as an asset.

(2) Where any amount as referred to in sub-paragraph (1) of this paragraph

is treated as an asset -

(a)

it shall be written off by reasonable amounts each year;

(b)

it shall be completely written off before repayment of the debt;

and

(c) if the current amount is not shown as a separate item in the

company's balance sheet it shall be disclosed in the notes to the accounts.

B 9R7

CURRENT VALUE ACCOUNTING RULES

Preliminary

Subject to paragraphs 39, 40 and 41 of this Schedule-

(a) the amounts to be included in respect of assets of any description

mentioned in paragraph 34 of this Schedule shall be determined in accordance

with that paragraph; and

(b) subject to paragraph 33 of this Schedule, the amounts to be included in

respect of assets of any description mentioned in paragraph 35 of this Schedule so

set out may be determined in accordance with that paragraph or the rules set out

in paragraphs 21 to 31 of this Schedule ("the historical cost accounting rules").

The same valuation method shall be applied to all investments included in

any item in the balance sheet format which is denoted by an Arabic number.

Valuation of assets: general

(1) Subject to paragraph 36 of this Schedule, investments falling to be

included under Assets item C (investments) shall be included at their current value

calculated in accordance with paragraphs 37 and 38 of this Schedule.

(2) Investments falling to be included under Assets item D (assets held to

cover linked liabilities) shall be shown at their current value calculated in accordance

with paragraphs 37 and 38 of this Schedule.

Assets falling to be included under Assets items FJ (tangible assets) and

EIV (own shares) in the balance sheet format may be shown at their current value

calculated in accordance with paragraphs 37 and 38 of this Schedule or at their current

cost.

Alternative valuation of fixed-income securities

(1) This paragraph applies to debt securities and other fixed-income

securities shown as assets under Assets items C.1I (investments in group undertakings

and participating interests) and C.lII (other financial investments).

(2) Securities to which this paragraph applies may either be valued in

accordance with paragraph 34 of this Schedule or their amortised value may be shown

in the balance sheet, in which case the provisions of this paragraph apply.

(3) Subject to sub-paragraph (4) of this paragraph, where the purchase price

of securities to which this paragraph applies exceeds the amount repayable at maturity,

the amount of the difference -

(a)

shall be charged to the profit and loss account, and

(b) shall be shown separately in the balance sheet or in the notes to

the accounts.

(4) The amount of the difference referred to in sub-paragraph (3) of this

paragraph may be written off in instalments so that it is completely written off when

the securities are repaid, in which case there shall be shown separately in the balance

sheet or in the notes to the accounts the difference between the purchase price (less the

aggregate amount written off) and the amount repayable at maturity.

(5) Where the purchase price of securities to which this paragraph applies

is less than the amount repayable at maturity, the amount of the difference shall be

released to income in instalments over the period remaining until repayment, in which

case there shall be shown separately in the balance sheet or in the notes to the accounts

the difference between the purchase price (plus the aggregate amount released to income)

and the amount repayable at maturity.

(6) Both the purchase price and the current value of securities valued in

accordance with this paragraph shall be disclosed in the notes to the accounts.

(7) Where securities to which this paragraph applies which are not valued

in accordance with paragraph 34 of this Schedule are sold before maturity, and the

proceeds are used to purchase other securities to which this paragraph applies, the

difference between the proceeds of sale and their book value may be spread uniformly

over the period remaining until the maturity of the original investment.

Meaning of "current value"

(1) Subject to sub-paragraph (5) of this paragraph, in the case of

investments, other than land and buildings, current value shall mean market value

determined in accordance with this paragraph.

(2) In the case of listed investments, market value shall mean the value on

the balance sheet date or, when the balance sheet date is not a stock exchange trading

day, on the last stock exchange trading day before that date.

(3) Where a market exists for unlisted investments, market value shall mean

the average price at which such investments were traded on the balance sheet date or,

when the balance sheet date is not a trading day, on the last trading day before that

date.

(4) Where, on the date on which the accounts are drawn up, listed or unlisted

investments have been sold or are to be sold within the short term, the market value

shall be reduced by the actual or estimated realisation costs.

(5) Except where the equity method of accounting is applied, all

investments, other than those referred to in sub-paragraphs (2) and (3) of this paragraph,

shall be valued on a basis which has prudent regard to the likely realisable value.

(1) In the case of land and buildings, current value shall mean the market

value on the date of valuation, where relevant, reduced as provided in sub-paragraphs

(4) and (5) ofthis paragraph.

(2) Market value shall mean the price at which land and buildings could be

sold under private contract between a willing seller and an ann's length buyer on the

date of valuation, it being assumed that the property is publicly exposed to the market,

that market conditions permit orderly disposal and that a normal period, having regard

to the nature of the property, is available for the negotiation of the sale.

(3) The market value shall be determined through the separate valuation

of each land and buildings item, carried out at least every five years in accordance with

generally recognised methods of valuation.

(4) Where the value of any land and buildings item has diminished since

the preceding valuation under sub-paragraph (3) of this paragraph, an appropriate value

adjustment shall be made.

(5) The lower value arrived at under sub-paragraph (4) of this paragraph

shall not be increased in subsequent balance sheets unless such increase results from a

new determination of market value arrived at in accordance with sub-paragraphs (2)

and (3) of this paragraph.

(6) Where, on the date on which the accounts are drawn up, land and

buildings have been sold or are to be sold within the short term, the value arrived at in

accordance with sub-paragraphs (2) and (4) of this paragraph shall be reduced by the

actual or estimated realisation costs.

Where it is impossible to determine the market value of a land and

(7)

buildings item, the value arrived at on the basis of the principle of purchase price or

production cost shall be deemed to be its current value.

Application of the depreciation rules

Where-

(1)

(a) the value of any asset of a company is determined in accordance

with paragraph 34 or 35 of this Schedule, and

(b) in the case of a detennination under paragraph 34 of this Schedule,

the asset falls to be included under Assets item C.I,

that value shall be the starting point for detennining the amount to be included in

respect of that asset in the company's accounts, instead of its purchase price or

production cost or any value previously so detennined for that asset; and paragraphs

23 to 27 and 31 of this Schedule shall apply accordingly in relation to any such asset

with the substitution for any reference to its purchase price or production cost by a

reference to the value most recently determined for that asset in accordance with

paragraph 34 or 35 of this Schedule.

(2) The amount of any provision for depreciation required in the case of

any asset by paragraph 24 or 25 of this Schedule as it applies by virtue of sub-paragraph

(1) of this paragraph is referred to in sub-paragraph (3) of this paragraph as the "adjusted

amount", and the amount of any provision which would be required in respect of that

asset according to the historical cost accounting rules is referred to as the "historical

cost amount".

(3) Where sub-paragraph (1) of this paragraph applies in the case of any

asset, the amount of any provision for depreciation in respect of that asset included in

any item shown in the profit and loss account in respect of amounts written off assets

of the description in question may be the historical cost amount instead of the adjusted

amount, provided that the amount of any difference between the two is shown separately

in the profit and loss account or in the notes to the accounts.

Additional information to be provided

(1) This paragraph applies where the amounts to be included in respect of

assets covered by any items shown in a company's accounts have been determined in

accordance with paragraph 34 or 35 of this Schedule.

(2) The items affected and the basis of valuation adopted in detennining

the amounts of the assets in question in the case of each of such item shall be disclosed

in the notes to the accounts.

(3) The purchase price of investments valued in accordance with paragraph

34 of this Schedule shall be disclosed in the notes to the accounts.

(4) In the case of each balance sheet item valued in accordance with

paragraph 35 of this Schedule either -

(a) the comparable amounts determined according to the historical

cost accounting rules (without any provision for depreciation or diminution

in value), or

(b) the differences between those amounts and the corresponding

amounts actually shown in the balance sheet in respect of that item,

shall be shown separately in the balance sheet or in the notes to the accounts.

(5) In sub-paragraph (4) of this paragraph, references in relation to any

item to the comparable amounts determined as there mentioned are references to -

(a) the aggregate amount which would be required to be shown in

respect of that item if the amounts to be included in respect of all the assets

covered by that item were determined according to the historical cost

accounting rules, and

the aggregate amount of the cumulative provisions for depreciation

(b)

or diminution in value which would be permitted or required in determining

those amounts according to those rules.

Revaluation reserve

(1) Subject to sub-paragraph (7) of this paragraph, with respect to any

determination of the value of an asset of a company in accordance with paragraph 34

or 35 of this Schedule, the amount of any profit or loss arising from that determination

shall be credited or, as the case may be, debited to a separate reserve to be called "the

revaluation reserve", after allowing, where appropriate, for any provisions for

depreciation or diminution in value made otherwise than by reference to the value so

determined and for any adjustments of any such provisions made in the light of that

determination.

(2) The amount of the revaluation reserve shall be shown in the company's

balance sheet under Liabilities item A.lII, but need not be shown under the name

"revaluation reserve".

(3) The revaluation reserve shall be reduced to the extent that the amounts

standing to the credit of the reserve are, in the opinion of the directors of the company, no

longer necessary for the purpose of the accounting policies adopted by the company; but

an amount may only be transferred from that reserve to the profit and loss account if -

(a)

the amount in question was previously charged to that account,

or

(b)

it represents realised profit.

(4) Any amounts transferred from the revaluation reserve to the profit and

loss account in accordance with the provisions of sub-paragraph (3) of this paragraph

shall be shown separately in the profit and loss account.

(5) Notwithstanding the provisions of sub-paragraph (3) of this paragraph,

the balance standing to the credit of the revaluation reserve may be capitalised in whole

or in part at any time.

(6) The treatment for taxation purposes of amounts credited or debited to

the revaluation reserve shall be disclosed in the notes to the accounts.

(7) This paragraph does not apply to the difference between the valuation

of investments and their purchase price or production cost or previous valuation shown

in the long term business technical account in accordance with note (9) on the profit

and loss account format.

RULES FOR DETERMINING PROVISIONS

Preliminary

Provisions which are to be shown in a company's accounts shall be

determined in accordance with paragraphs 43 to 53 of this Schedule.

Technical provisions

The amount of technical provisions must at all times be sufficient to cover

any liabilities arising out of contracts of insurance as far as can reasonably be foreseen.

Provision for unearned premiums

(1) The provision for unearned premiums shall in principle be computed

separately for each contract of insurance, save that statistical methods (and, in particular,

proportional and flat rate methods) may be used where they may be expected to give

approximately the same results as individual calculations.

(2) Where the pattern of risk varies over the life of a contract, this shall be

taken into account in the calculation methods.

Provision for unexpired risks

The provision for unexpired risks shall be computed on the basis of claims

and administrative expenses likely to arise after the end of the financial year from

contracts concluded before that date, in so far as their estimated value exceeds the

provision for unearned premiums and any premiums receivable under those contracts.

Long term business provision

(1) The long term business provision shall in principle be computed

separately for each long term contract, save that statistical or mathematical methods

may be used where they may be expected to give approximately the same results as

individual calculations.

(2) A summary of the principal assumptions in making the provision under

sub-paragraph (1) of this paragraph shall be given in the notes to the accounts.

(3) The computation shall be made annually by an approved actuary

appointed by the company under the Act, on the basis of recognised actuarial methods,

with due regard to the actuarial principles set out in Part X of the Insurance Business

(Companies Assets and Liabilities) Regulations, 2000.

Provisions for claims outstanding

General business

(1) A provision shall in principle be computed separately for each claim

on the basis of the costs still expected to arise, save that statistical methods may be

used if they result in an adequate provision having regard to the nature of the risks.

(2) This provision shall also allow for claims incurred but not reported by

the balance sheet date, the amount of the allowance being determined having regard to

past experience as to the number and magnitude of claims reported after previous

balance sheet dates.

(3) All claims settlement costs (whether direct or indirect) shall be included

in the calculation of the provision.

(4) Recoverable amounts arising out of subrogation or salvage shall be

estimated on a prudent basis and either deducted from the provision for claims

outstanding (in which case if the amounts are material they shall be shown in the notes

to the accounts) or shown as assets.

(5) In sub-paragraph (4) of this paragraph, "subrogation" means the

acquisition of the rights of policy holders with respect to third parties, and "salvage"

means the acquisition of the legal ownership of insured property.

(6) Where benefits resulting from a claim must be paid in the form of

annuity, the amounts to be set aside for that purpose shall be calculated by recognised

actuarial methods, and paragraph 48 of this Schedule shall not apply to such calculations.

(7) Implicit discounting or deductions, whether resulting from the placing

of a current value on a provision for an outstanding claim which is expected to be

settled later at a higher figure or otherwise effected, is prohibited.

(1) Explicit discounting or deductions to take account of investment income

is permitted, subject to the following conditions -

(a) the expected average interval between the date for the settlement

of claims being discounted and the accounting date shall be at least four

years,

(b) the discounting or deductions shall be effected on a recognised

prudential basis,

(c) when calculating the total cost of settling claims, the company

shall take account of all factors that could cause increases in that cost,

(d) the company shall have adequate data at its disposal to construct

a reliable model of the rate of claims settlements,

(e) the rate of interest used for the calculation of present values shall

not exceed a rate prudently estimated to be earned by assets of the company

which are appropriate in magnitude and nature to cover the provisions for

claims being discounted during the period necessary for the payment of

such claims, and shall not exceed either

(i) a rate justified by the performance of such assets over the

preceding five years, or

(ii) a rate justified by the performance of such assets during the

year preceding the balance sheet date.

(2) When discounting or effecting deductions, the company shall, in the

notes to the accounts, disclose-

(a)

the total amount of provisions before discounting or deductions,

(b) the categories of claims which are discounted or from which

deductions have been made,

(c) for each category of claims, the methods used, in particular the

rates used for the estimates referred to in indents (d) and (e) of sub-paragraph

(1) of this paragraph and the criteria adopted for estimating the period that

will elapse before the claims are settled.

Long term business

The amount of the provision for claims shall be equal to the sums due to

beneficiaries, plus the costs of settling claims.

Equalisation reserves

The amount of any reserve maintained under subsection 7 of section 17 of

the Act shall be determined in accordance with Part VIII of the Insurance Business

(Companies Assets and Liabilities) Regulations, 2000.

Accounting on a non-annual basis

(1) Either of the methods described in paragraphs 52 and 53 of this Schedule

may be applied where, because of the nature of the class or type of business in question,

infonnation about premiums receivable or claims payable (or both) for the underwriting

years is insufficient when the accounts are drawn up for reliable estimates to be made.

(2) The use of either of the methods referred to in sub-paragraph (1) of this

paragraph shall be disclosed in the notes to the accounts together with the reasons for

adopting it.

(3) Where one of the methods referred to in sub-paragraph (1) of this

paragraph is adopted, it shall be applied systematically in successive years unless

circumstances justify a change.

(4) In the event of a change in the method applied, the effect on the assets,

liabilities, financial position and profit or loss shall be stated in the notes to the accounts.

(5) For the purposes of this paragraph and paragraph 52 of this Schedule,

"underwriting year" means the financial year in which the contracts of insurance in the

class or type of business in question commenced.

(1) The excess ofthe premiums written over the claims and expenses paid

in respect of contracts commencing in the underwriting year shall fonn a technical

provision included in the technical provision for claims outstanding shown in the balance

sheet under Liabilities item C.3.

(2) The provision may also be computed on the basis of a given percentage

of the premiums written where such a method is appropriate for the type of risk insured.

(3) If necessary, the amount of this technical provision shall be increased

to make it sufficient to meet present and future obligations.

(4) The technical provision constituted under this paragraph shall be

replaced by a provision for claims outstanding estimated in accordance with paragraph

47 of this Schedule as soon as sufficient infonnation has been gathered and not later

that the end of the third year following the underwriting year.

(5) The length of time that elapses before a provision for claims outstanding

is constituted in accordance with sub-paragraph (4) of this paragraph shall be disclosed

in the notes to the accounts.

(1) The figures shown in the technical account or in certain items within it

shall relate to a year which wholly or partly precedes the financial year (but by no

more than 12 months).

(2) The amounts of the technical provisions shown in the accounts shall if

necessary be increased to make them sufficient to meet present and future obligations.

(3) The length of time by which the earlier year to which the figures relate

precedes the financial year and the magnitude of the transactions concerned shall be

disclosed in the notes to the accounts.

TITLE III - NOTES TO THE ACCOUNTS

Preliminary

Any information required in the case of any company by the provisions of

this paragraph shall, if not given in the balance sheet or the profit and loss account, be

given by way of the notes to the accounts. The information in respect of the following

matters shall be provided as a minimum -

General

(a) The valuation methods applied to the various items in the individual

accounts, and the methods employed in calculating the provisions for depreciation and

diminution in value. For items included in the individual accounts which are or were

originally expressed in foreign currency, the basis of translation used to express them

in Maltese liri shall be disclosed;

Share capital and debentures

(b) The number and the nominal value of the shares subscribed during the

accounting period within the limits of the authorised capital;

(c) Where there is more than one class of shares, the number and the nominal

value for each class, in respect of both the authorised and the issued shares;

(d) The existence of any participation certificates, convertible debentures

or similar securities or rights, with an indication of their number and the rights they

confer;

(e) Information concerning the acquisition by a company of its own shares,

either itself or through a person acting in his own name but on the company's behalf,

relating to

the reasons for acquisitions made during the accounting period,

(i)

(ii) the number and nominal value of the shares acquired and disposed

of during the accounting period and the proportion of the issued share capital

which they represent,

(iii) in the case of acquisition or disposal for a value, the consideration

for the shares,

(iv) the number and nominal value of all the shares acquired and held

by the company and the proportion of the issued share capital which they

represent;

Particulars ofpartnerships

(f) The name, registered office and the type of each of the partnerships of

which the company is a member with unlimited liability; provided that this information

may be omitted if it is not material;

(g) Information in respect of any assets of the company included in Assets

items B (intangible assets), C.I (land and buildings) and c.n (investments in group

undertakings and participating interests) in the company's balance sheet, relating to

(i) the amount of the purchase price or production cost, leaving out

therefrom the depreciation or diminution in value in respect of those assets

included in those items, as at the date of the beginning of the accounting

period and as at the balance sheet date respectively;

(ii) the effect on any amount included in Assets item B in respect of

those assets of -

(aa)

acquisitions during that period of any assets,

(bb)

disposals during that period of any assets, and

(cc) any transfers of assets ofthe company to and from the item

during that period;

(h) In addition, in respect of any asset of the company included in any

assets item in the company's balance sheet, there shall be stated (by reference to each

such item)

(a) the cumulative amount of provisions for depreciation or diminution

in value of those assets included under the item as at each date mentioned in

indent (i) of sub-paragraph (g) of this paragraph;

(b)

the amount of any such provisions made in respect of the

accounting period;

(c) the amount of any adjustments made in respect of any such

provisions during that period in consequence of the disposal of any of those

assets; and

(d) the amount of any other adjustments made in respect of any such

provisions during that period;

Details of indebtedness

(i) Amounts owed by the company and becoming due and payable after

more than five years as well as the company's entire debts covered by valuable security

furnished by the company with an indication of the nature and form of the security.

This information shall be disclosed separately for each creditors' item, as provided for

in the balance sheet format set out in Title I of this Schedule;

Financial commitments

U) The total amount of any financial commitments that are not included in

the balance sheet, in so far as this information is of assistance in assessing the financial

position. Any commitments concerning pensions and group undertakings shall be

disclosed separately;

Particulars of business

(k)

(i)

As regards general business of insurance, a company shall disclose -

(aa)

gross premiums written

(bb)

gross premiums earned

(cc)

gross claims incurred

(dd)

gross operating expenses

(ee)

the reinsurance balance;

(ii) The amounts required to be disclosed by indent (i) of this sub-paragraph

shall be broken down between direct business of insurance and reinsurance acceptances,

if reinsurance acceptances amount to 10 per centum or more of gross premiums written;

(iii) Subject to indent (iv) of this sub-paragraph, the amounts required to be

disclosed by indents (i) and (ii) of this sub-paragraph with respect to direct business of

insurance shall be further broken down into the following groups of classes -

(aa)

accident and health

(bb)

motor (third party liability)

(cc)

motor (other classes)

(dd)

marine, aviation and transport

(ee)

fire and other damage to property

(ff)

third party liability

(gg)

credit and suretyship

(hh)

legal expenses

(ii)

assistance

OJ)

miscellaneous,

where the amount of the gross premiums written in direct business of insurance for

each such gronp exceeds five million Maltese liri;

(iv) The company shall in any event disclose the amounts relating to the three

largest groups of classes in its business;

(i)

As regards long term business of insurance, the company shall

(1)

(aa)

gross premiums written

(bb)

the reinsurance balance;

(ii)

Subject to indent (iii) of this sub-paragraph -

(aa) gross premiums written shall be broken down between those

written by way of direct business of insurance and those written by way

of reinsurance; and

(bb) gross premiums written by way of direct business of

insurance shall be broken down -

(aaa) between individual premiums and premiums under

group contracts,

(bbb)

between periodic premiums and single premiums,

and

(ccc) between premiums from non-participating contracts,

premiums from participating contracts and premiums from

contracts where the investment risk is borne by policy holders;

(iii) Disclosure of any amount referred to indent (ii)(aa) or (bb)(aaa),

(bbb) or (ccc) of this sub-paragraph shall not be required if it does not exceed

10 per centum of the gross premiums written or (as the case may be) of the

gross premiums written by way of direct business of insurance;

(m) (i) Subject to indent (ii) ofthis sub-paragraph, there shall be disclosed

as regards both general business and long term business of insurance the total gross

direct business premiums resulting from contracts concluded by the company :-

(aa)

in or from Malta, and

(bb)

in or from a country outside Malta;

Disclosure of any amount referred to in indent (i) of this sub-paragraph

(ii)

shall not be required if it does not exceed 5 per centum of total gross premiums;

Commissions

(n) There shall be disclosed the total amount of commissions for direct

business of insurance accounted for in the accounting period, including acquisition,

renewal, collection and portfolio management commissions;

Particulars ofstaff

(i) The average number of persons employed during the accounting

(0)

period, broken down by categories and, if they are not disclosed separately in the

profit and loss account, the staff costs relating to the accounting period;

(ii) In respect of all persons employed by the company during the fmancial year

who are taken into account in determining the relevant annual number for the purposes of

sub-paragraph (o)(i) there shall also be stated the aggregate amounts respectively of-

(aa) wages and salaries paid or payable in respect of that year to

those persons; and

(bb)

social security costs incurred by the company on their behalf;

Particulars oftax

(p) The difference between the tax charged for the accounting period and

for earlier accounting periods and the amount of tax payable in respect of those periods,

provided that this difference is material for purposes of future taxation. This amount

may also be disclosed in the balance sheet as a cumulative amount under a separate

item with an appropriate heading;

Particulars ofdirectors

(q) (i) The aggregate amount of the emoluments granted in respect of

the accounting period to the directors of a company for their services as directors of

that company or for their services as directors of any of its subsidiary undertakings,

while acting as directors of that company; and

(ii) The aggregate amount of any other emoluments granted in respect of the

accounting period to the directors of a company for their services in connection with

the management of the affairs of the company or any of its subsidiary undertakings,

while acting as directors of that company; and shown separately from the aggregate

amount of emoluments referred to in indent (i) of this sub-paragraph; and

(iii) The fact that the company has during the accounting period purchased or

maintained any such insurance as is referred to in subsection (2) of section 148 of the

Companies Act, 1995 and the aggregate amount of premiums paid in respect thereof;

In this indent emoluments shall include the remuneration for the services of the directors

referred to herein and all fees, percentages, gifts, compensation for loss of office and

other similar payments; as well as any commitments arising or entered into in respect

of retirement pensions, superannuation allowances, gratuities or other similar

commitments in favour of former directors of the company referred to herein;

The commitments arising or entered into in respect of retirement pensions,

superannuation allowances, gratuities or other similar commitments in favour of former

directors of the company shall be shown separately from the other emoluments;

For the purpose of this sub-paragraph, "officer," as is referred to in subsection (2) of

section 148 in the Companies Act, 1995 has the same meaning as is assigned to it by

that Act;

(r) The amount of advances and credits granted to directors of a company

with indications of the interest rates, main conditions and any amounts repaid, as well

as commitments entered into on their behalf by way of guarantees of any kind. The

said commitment shall be shown separately;

Particulars ofgroup undertakings

(s) The name and the registered office of the undertaking which draws up

the consolidated accounts of the largest body of undertakings of which the company

forms part as a subsidiary undertaking;

(t) The name and the registered office of the undertaking which draws up

the consolidated accounts of the smallest body of undertakings of which the company

forms part as a subsidiary undertaking; and

(u) Where the parent undertakings referred to in sub-paragraph(s) and (t)

of this paragraph are not registered in Malta, the place where copies of the consolidated

accounts referred to in these sub-paragraphs may be obtained, provided that they are

available to the public.

Dealings with or interests in group undertakings

(1) If at the end of its accounting period, the company has one or more

subsidiary undertakings or participating interests in other undertakings, the following

information shall, where applicable, be given with respect to each such undertaking -

(a)

the kind, name and registered or principal office of each

undertaking~

(b) in relation to the shares of each class of each undertaking held by

the company, the identity of each class and the proportion of the nominal

value of the issued shares of that class represented by the shares held as at

the end of the undertaking's relevant accounting period~ and

(c) the aggregate amount of the capital and reserves of each

undertaking as at the end of its relevant accounting period, and its profit or

loss for that period.

(2) For the purposes of sub-paragraph (1) of this paragraph, the relevant

accounting period is -

(a) if the accounting period of the undertaking ends with that of the

company giving the information in its notes to the accounts, that accounting

period~ and

(b) if not, the undertaking's accounting period ending last before the

end of the accounting period of the company giving that information.

(3) The provisions of sub-paragraph (1) of this paragraph are subject to

the exceptions and other provisions contained in paragraphs 56 and 57 of this Schedule.

(1) The information otherwise required by indent (c) of sub-paragraph

(1) of paragraph 55 of this Schedule need not be given in respect of a subsidiary

undertaking of a company if -

(a) the accounts of the subsidiary undertaking are included in the

consolidated accounts, or

(b) the investment of the company in the shares of the subsidiary

undertaking is included in the consolidated accounts, or in the notes to the

consolidated accounts, by way of the equity method of accounting.

(2) The information otherwise required by indent (c) of sub-paragraph (1)

of paragraph 55 so set out need not be given in respect of another undertaking in

which the company holds shares if the company's investment in those shares is included

in the individual accounts, or in the notes to the accounts, by way of the equity method

of accounting.

(3) The information otherwise required by indent (c) of sub-paragraph (1)

of paragraph 55 of this Schedule need not be given in respect of any undertaking if -

(a) the undertaking is not required by any provision of the Companies

Act to deliver a copy of its balance sheet for its relevant accounting period

mentioned in paragraph 55 of this Schedule and does not otherwise publish

that balance sheet in Malta or elsewhere; and

(b) the shares held by the company, either directly or indirectly, in

that undertaking amount to less than one half in nominal value of the

undertaking's issued share capital.

(4) Information otherwise required by sub-paragraph (1) of paragraph 55

of this Schedule need not be given if it is not material.

(5) References in this paragraph and in paragraph 55 of this Schedule to

shares of undertakings shall include references to beneficial interests in undertakings

where the capital of such undertakings is not divided into shares.

(1) The information referred to in paragraphs 55 and 56 of this Schedule

may be disclosed in a separate statement which is to be filed with the Registrar of

Companies together with the individual accounts of the company in accordance with

section 181 of the Companies Act, 1995. A copy of that statement shall also be filed

with the Centre together with the company's audited financial statements.

(2) Where the information referred to in sub-paragraph (1) of this paragraph

is disclosed in a separate statement this fact shall be disclosed in the notes to the

accounts.

(3) The information referred to in paragraphs 55 and 56 of this Schedule

may be omitted when it appears to the directors that its nature is such that they would

be seriously prejudicial to any of the undertakings affected by these provisions and the

Registrar, with the concurrence of the Centre, agrees that the information need not be

disclosed.

(4) Where any information is omitted from the notes to the accounts by

virtue of the provisions of sub-paragraph (3) of this paragraph that fact shall be disclosed

in the notes to the accounts.

Guarantees and other financial commitments

(1) Particulars shall be given in the notes to the accounts of any charge on

the assets of the company to secure the liabilities of any other person, including, where

practicable, the amount secured.

(2) The following information shall be given with respect to any other

contingent liability not provided for (other than a contingent liability arising out of a

contract of insurance) -

(a)

the amount or estimated amount of that liability;

(b)

its legal nature; and

(c) whether any valuable security has been provided by the company

in connection with that liability and if so, what valuable security has been so

provided.

(3)

There shall be stated, where practicable -

(a) the aggregate amount or estimated amount of contracts for capital

expenditure, so far as not provided for; and

(b) the aggregate amount or estimated amount of capital expenditure

authorised by the directors which has not been contracted for.

(4) Particulars shall also be given of any other financial commitments,

other than commitments arising out of contracts of insurance, which -

(a)

have not been provided for; and

(b)

are relevant to assessing the company's state of affairs.

(5) Commitments within any of the preceding sub-paragraphs of this

paragraph undertaken on behalf of or for the benefit of -

(a)

any parent undertaking or fellow subsidiary undertaking, or

(b)

any subsidiary undertaking of the company,

shall be stated separately from the other commitments within that sub-paragraph, and

commitments within indent (a) of this sub-paragraph shall also be stated separately

from those within indent (b) thereof.

.

(6) Reference in this paragraph to "fellow subsidiary undertakings" is

reference to undertakings which are subsidiary undertakings of the same parent

undertaking but are not parent undertakings or subsidiary undertakings of each other.

Reserves and provisions

(1)

Where any amount is transferred -

(a)

to or from any reserves; or

(b)

to any provision for liabilities and charges; or

(c) from any provision for liabilities and charges otherwise than for

the purpose for which the provision was established,

and the reserves or provisions are shown as separate items in the company's balance

sheet or in the notes to the accounts, the information mentioned in sub-paragraph (2)

of this paragraph shall be given in respect of the aggregate of reserves or provisions

included in the same item.

(2) That information to which reference is made in sub-paragraph (1)

of this paragraph is -

(a) the amount of the reserves or provisions as at the date of the

beginning of the accounting period and as at the balance sheet date

respectively;

(b) any amounts transferred to or from the reserves or provisions

during that period; and

(c) the source and application respectively of any amounts so

transferred.

TITLE IV - TRANSITIONALARRAGEMENT

(1) If, when individual accounts are drawn up in accordance with the

provisions of this Schedule for the first time, the purchase price or production cost of

a fixed asset cannot be determined without undue expense or delay, the net book amount

at the beginning of the accounting period may be treated as the purchase price or

production cost.

(2) Any application of sub-paragraph (1) of this paragraph shall be disclosed

in the notes to the accounts.