Research On The Unit-linked Insurance Accounting

The unit-linked insurance is one kind of insurance policy which doesn't only provide security but also investment for policyholders. Since it was introduced to China in 1999, it has got a massive progress. Although there was fluctuation during its development, it has a bright future in China due to its main features. However, while the unit-linked insurance developed quickly in the past years, the research on the unit-linked insurance accounting is not enough. Under the background that the international insurance accounting is facing great innovations, the unit-linked insurance accounting standards of insurance company issued by the Treasury of China is not fit any more. At the meantime, a financial crisis, which has a significant impact on the field of finance and insurance, triggered by the US sub prime lending crisis is sweeping the globe. China's insurance industry is also hard to be an exception. The crisis gives a warning to China's insurance industry that insurance companies should pay more attention to risk management. Domestic insurance industry recognized that the insurance industry should return to core business in order to guard against possible risks. Under certain circumstance, it is significant to do research on the accounting treatment of the unit-linked insurance. For this reason, this article aims to do a tentative research on the accounting issues of the unit-linked insurance systematically and provides some shallow views and thinking.This dissertation consists of six chapters:Chapter 1 discusses the concept and the main features of the unit-linked insurance. In short, the main features are as follows: (1) Fixed premium but variable amount insured. (2) Independent account. (3) Cash value depends on the performance of the independent account. (4) The policyholder gets the yields and bears the risks. Then course of development of the unit-linked insurance at home and abroad is introduced in this chapter.Chapter 2 discusses the basic theory and the basic principles of the accounting treatment of the unit-linked insurance. Two basic theories are involved. One is the definition of insurance contract. The other is the unbundling of the insurance component and the deposit component. Due to the features of the unit-linked insurance, the policyholders bear the investment risks, which is different from the insurance risks. Furthermore, the amount which goes into the independent account is defined due the contract. Therefore, the insurance component and the deposit component of the unit-linked insurance are able to be recognized separately and the deposit component is able to be measured independently. In order to reflect the economic events objectively, the unbundling is required. In essence, the amount going into the independent account and generated by investment is the insurer's liability to the policyholder. So, there are three basic principles of the accounting treatment of the unit-linked insurance—unbundling of the insurance component and the deposit component, establishment of the independent account and no impact on the profit and loss of the insurer.Chapter 3 refers to the recognition and measurement of the accounting elements. This chapter only analyzes the recognition and measurement of asset, liability, revenue and expense of the ordinary account.Chapter 4 focuses on the recognition and measurement of the accounting elements of the independent account. In essence, the amount going into the independent account and generated by investment is the insurer's liability to the policyholder. So, only asset and liability are mention in the independent account. Then we discuss the disclosure of the accounting information of the unit-linked insurance, especially the independent account. The disclosure of the independent account contains its disclosure in the insurer's financial statement and disclosure of itself.Chapter 5 analyzes the problem existing in the present accounting treatment system of the unit-linked insurance in China, and gives some proposal to make it more efficient and reasonable.Innovation of this dissertation:1. The topic is new and significant in the field of the insurance accounting. In China, the research on the unit-linked insurance is not enough. Some issues mentioned in the topic are still discussed in the western countries.2. This dissertation proposes a new method of accounting treatment of the unit-linked insurance that only"independent account asset"and"independent account liability"are used in the accounting process.3. This dissertation does a tentative research on the unit-linked insurance accounting systematically.Due to the author's knowledge limitation, there is deficiency existing in this dissertation.