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HMRC internal manual

General Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

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

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

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Underwriting year basis

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