Research On Accounting For Financial Reinsurance Contracts

Financial reinsurance was first originated from Lloyd's of London in 1960s. Until the last century the late 80s early 90s, the U.S. insurance industry began to be used it in capital market. Compared with the traditional reinsurance, financial reinsurance can optimize the structure of balance sheet, improve the solvency margin, effectively deduce the wave of finance result to balance the income of every period, etc. Financial reinsurance has become popular and grown rapidly in the global. Just because its special use, however, when we adopt this kind of reinsurance, it can create the risks in opportunities for abusing. Simultaneously, only standard and scientific regulation in operating financial reinsurance can avoid handling loss to investor, the insured, etc. Thus it can ensure the insurance market in a stabilized and developmental condition. Though financial reinsurance has applied and developed for more than twenty years in western countries, related research in this area just begins in China. The development of our country's insurance industry is only nearly 20 years, traditional reinsurance is still in the primacy of the China's reinsurance market. In practice, financial reinsurance has quietly used it.This thesis is analyzing firstly the general theories of financial reinsurance regulation, and then explaining the effect and meaning of regulation in applying financial reinsurance to reinsurance marketplace. At the same time, it lies in applying financial reinsurance for the following chapter to establish the regulation of accounting treatment. Because it has the risks in opportunities for abusing, this thesis begins with analyzing the essence and effect of financial reinsurance and taking HIH & AIG transacting as a real example. As our country in the use and supervision of financial reinsurance is at the preliminary and exploratory stage, the relevant laws and regulations is not prefect. The Ministry of Finance has promulgated the "New Accounting Standard No.25:the original insurance contract" and "Accounting Standard No.26:Reinsurance Contract" in February 2006, the China Insurance Regulatory Commission has put forth a series of regulation, however, its almost haven't directly referred to or concerned the financial reinsurance, and haven't give a clear definition of the special reinsurance contracts'accounting treatment. This paper compared and analyzed the relevant laws and regulations of the U.S Financial Reporting Standards, U.K Financial Reporting Standards and Singapore Financial Reporting Standards. Then it summarizes experiences of international regulations of the accounting treatment in financial reinsurance. Finally, according with the condition of applying the financial reinsurance in our country, the last chapter tries to structure the accounting system of the financial reinsurance in our country.