GIM2091 - Accounting framework: annual accounting: comparison of accident year and underwriting year reporting: example

Policy incepts on 1 January 2008; two year duration.

Premium £1000.

Claims £750 - £400 made in 2008 and £350 made in 2009.

80% of claims paid in year of claim and remaining 20% in following year.

Accident year basis

Accident Years	-	Annual accounts 2008	Annual accounts 2009	Annual accounts 2010	Total
2008	Premium paid	1000	-	-	-
-	Unearned premium provision c/f	(500)	-	-	-
-	Premium earned	500 [A]	-	-	-
-	Outstanding claims b/f	0	-	-	-
-	Claims paid	320	-	-	-
-	Outstanding claims c/f	80	-	-	-
-	Claims incurred	400 [B]	-	-	-
-	Profit [A] - [B]	100	--	-	-
2009	Premium paid	-	0		-
-	Unearned premium provision b/f	-	500	-	-
-	Unearned premium provision c/f	-	0	-	-
-	Premium earned	-	500 [C]	-	-
-	Outstanding claims b/f	-	(80)	-	-
-	Claims paid	-	360		-
-	Outstanding claims c/f	-	70	-	-
-	Claims incurred	-	350 [D]	-	-
-	Profit [C] - [D]	-	150	-	-
2010	Premiums paid/earned	-	-	0	-
-	Outstanding claims b/f	-	-	(70)	-
-	Claims paid	-	-	70	-
-	Outstanding claims c/f	-	-	0	-
-	Claims incurred	-	-	0	-
Summary of profit	-	100	150	0	250

Underwriting year	-	Annual accounts 2008	Annual accounts 2009	Annual accounts 2010	Total
2008	Premium paid	1000	0	-	1000
-	Unearned premium provision b/f	0	500	-	500
-	Unearned premium provision c/f	(500)	(0)	-	(500)
-	Premium earned	500	500	-	1000
-	Outstanding claims b/f	0	(80)	(70)	(150)
-	Claims paid	320	360	70	750
-	Outstanding claims c/f	80	70	0	150
-	Claims incurred	400	350	0	750
	Net profit	100	150	0	-
	Profit	-	-	-	250