OPERATIONAL FOREX DEPOS-ITS NOT CLASSED AS OVER-SEAS INVESTMENTS

03/01/2003

---

In December 2002, the Department of Insurance (DOI) amended the Guidelines for the Scope and Content of Overseas Investments by Insurance Companies. Article 4 Paragraph 3 provides that foreign currency deposits held by an insurer for insurance business operational needs and not for investment purposes can be excluded from the calculation of the insurer's overseas investments. The DOI recently announced six major catego-ries of foreign currency deposits that need not be counted as overseas investments:

Overseas reinsurance indemnification income and expenditure;

Overseas reinsurance commission income and expenditure;

Overseas reinsurance premium income and expenditure;

Overseas reinsurance earnings commission income and expenditure;

Overseas direct business premium income and indemnification expenditure; and

Working capital funds remitted by overseas insurers.

In future, the above items should be recorded separately from foreign currency deposits held for investment purposes, and must be subject to separate account control.