Hong Kong Regulations

INSURANCE COMPANIES (DETERMINATION OF LONG TERM LIABILITIES) REGULATION - SECT 15

Acquisition expenses

(1) In order to take account of acquisition expenses, the maximum annual
premium to be valued under section 14 may (subject to subsection

(2)) be increased by an amount not greater than the equivalent, taken over the
whole period of premium payments and calculated according to the rates of
interest and rates of mortality or disability employed in valuing the
contract, of the lower of-

   (a)  (i) in the case of long term business carried on in or from Hong Kong,
        150% of the annual premium to be valued under section 14; and

        (ii)   in the case of any other long term business, 3.5% of the
               relevant capital sum under the contract; or

   (b)  the defined percentage of the relevant capital sum under the contract.

(2) For the purposes of subsection (1), "the defined percentage" (界定
百分率) is the percentage arrived at by taking (for all contracts of the
same type as the contract in question for which an adjustment is made) the
average of the percentages of the relevant capital sum under each such
contract that represent the acquisition costs incurred which, after allowing
for the effects of taxation, might reasonably be expected to be recovered from
the premiums payable under the contract.

(3) The increase permitted by subsection (1) shall be subject to the
limitation that the amount of a future premium valued shall not in any event
be greater than the amount of the premium actually payable by the policy
holder.

(4) For the purposes of this section, "relevant capital sum" (有關資本
額) means, in the case of-

   (a)  whole life assurances, the sum assured;

   (b)  policies where a sum is payable on maturity (including policies where
        a sum is also payable on earlier death), the sum payable on maturity;

   (c)  deferred annuities, the capitalised value of the annuity at the
        vesting date (or the cash option if it is greater);

   (d)  capital redemption contracts, the sum payable at the end of the
        contract period; and

   (e)  temporary assurances, the sum assured, excluding in all cases any
        vested reversionary bonus. (Enacted 1995)

"the defined percentage" (界定百分率)

"relevant capital sum" (有關資本額)