Page 83 - Continental Reinsurance 2022 Annual Report
P. 83
Statement of Significant Accounting Policies 81
2.9.2 Gross premium 2.9.6 Reserve for outstanding claim
Premium is recognized as income when offers from Reserve for outstanding claims represents provisions
ceding companies are confirmed via credit notes. This made to account for estimated cost of all claims and the
comprises premiums generated on contracts entered related claims handling expenses incurred but not paid at
into during the year as well as premiums and the reporting date. This includes the cost of claims
adjustments on contracts entered into in earlier years but incurred but not reported (IBNR) using best available
confirmed in the current accounting year. Also, premium information.
for the year includes estimates for pipeline or premium
not yet advised by the ceding companies for contracts A full provision is made for the estimated cost of all
in-force at the end of the year. claims notified but not settled at the reporting date,
using the best information available at that time.
Pipeline premiums are estimated on the basis of latest Provision is also made for the cost of claims incurred but
available information and historic premium not reported (IBNR) until after the reporting date.
development patterns. Similarly, provision is made for “unallocated claims
expenses” being the estimated administrative expenses
All written premiums are recorded on underwriting year that will be incurred after the reporting date in settling all
basis and a provision is made for unearned income as claims outstanding as at the date, including IBNR.
Reserve for Unexpired Risk for the portion of premium Differences between the provision for outstanding
relating to the current underwriting year that have not claims at a reporting date and the subsequent settlement
expired by the end of the accounting year. Earned are included in profit or loss of the following year.
Premium Income represents Gross Premium less change
in reserve for unearned Premium during the year. Based on the best available information, this reserve is
calculated using standard actuarial methods and
2.9.3 Retrocession historical claims experience.
Retrocession recoveries represent that portion of claims
paid/payable on risks ceded out in respect of which 2.9.7 Liability adequacy test
recoveries are received/ receivable from the Liabilities from insurance policies are tested by certified
retrocessionaire. professional actuary at each reporting date for adequacy
of the insurance liabilities recognised in the financial
Retrocession recoveries are disclosed separately as an statements. During this process, up-to-date estimates of
asset and charged against gross claims incurred to arrive current valuation parameters are examined, taking into
at net claims incurred. account all future cash flows associated with the
insurance policies, to determine whether the recognised
Retrocession assets are assessed annually for impairment liabilities are adequate. If these tests determine that the
and the carrying amount reduced with impairment carrying amount of the insurance liabilities is negative,
through profit or loss. taking into account capitalised acquisition costs and/or
capitalised policy portfolio values, the entire shortfall is
2.9.4 Gross Claims immediately recognised in profit or loss.
Gross claims represent estimates of claims and claims
handling expenses accrued during the accounting year. 2.9.8 Actuarial valuation of life insurance contract
Gross claims incurred are made up of gross claims and liabilities
changes in reserve for outstanding claims (including Actuarial valuation of life insurance contract liabilities is
IBNR) during the year. carried out annually by certified professional actuary for
the purpose of determining the surplus or deficit at the
2.9.5 Reserve for unexpired risks end of the year. All surpluses or deficits arising therefrom
The portion of the Non-life gross written premium which are charged to profit or loss.
has not yet been earned by the end of the accounting
year is accounted for as Reserve for Unexpired Risks. Retrocession premium represents the cost of outward
reinsurance for the year. The retrocession programme is
This is calculated using current underwriting year gross on underwriting year basis with appropriate reserves
written premium for all classes of business assuming calculated using the same basis as reserve for unexpired
premium earning patterns based on historical pattern risks.
and business knowledge.
