FSC Clarifies CSM Calculation Basis, Asks Insurers to Resubmit Questionnaire by June 11

(Central News Agency, reporter Su Siyun, Taipei, June 5) The Financial Supervisory Commission (FSC) recently sent a questionnaire to all life insurers requesting data on Contractual Service Margin (CSM). Due to inconsistent responses, the FSC held a briefing on June 3, inviting all life insurers to clarify the CSM calculation basis. The FSC explained that when reporting, different product groups should not have discrepancies due to different calculation personnel, and asked insurers to resubmit the questionnaire by June 11.

The insurance industry adopted International Financial Reporting Standard 17 (IFRS 17) and the new-generation solvency regime (TIS) this year. Under IFRS 17, profits from selling insurance policies are not recognized immediately but are gradually recognized as services are provided. Therefore, the realizable profit from each policy sold is treated as Contractual Service Margin (CSM). Life insurers have been announcing their accumulated CSM balances and the ratio of CSM released to profit and loss, making CSM a key source of profit for the life insurance industry and an important internal management indicator.

The FSC held a briefing on June 3, inviting life insurers. The briefing was chaired by Tsai Huo-yen, Deputy Director of the Insurance Bureau, and Chan Fang-shu, General Manager of the Taiwan Insurance Institute.

The Insurance Bureau explained that as the insurance industry adopts IFRS 17, each company uses different bases for estimating CSM. To understand these estimation bases, a questionnaire was sent asking insurers to explain the breakdown of CSM components and estimation assumptions. This was to facilitate comparison of CSM differences for the same type of product across companies. However, responses varied; some were detailed, while others were rough, providing only totals or lacking details on composition. The purpose of the June 3 briefing was to explain the requirements again and confirm any doubts about the reporting.

The Insurance Bureau noted that when insurers applied for TIS transitional measures, they used the same logic for estimation. However, the Taiwan Insurance Institute received reports where some insurers used different estimation bases for different contract groups (A and B) due to different calculation personnel. Therefore, insurers were told that if the logic in different reports differs, the erroneous report must be adjusted. Insurers were asked to resubmit the questionnaire by June 11. If there are time constraints, additional time may be granted.

Life insurers indicated that the FSC's main goal is to compare the CSM calculation basis for each company's products. Because each company has many products, the format of the previously submitted questionnaires was inconsistent, hence the need for a briefing to clarify. Regarding whether non-compliance with reporting standards would affect TIS borrowing limits, no specific measurement method was discussed at the meeting. (Editor: Chang Chun-mao) 1150605