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HMRC internal manual

General Insurance Manual

From
HM Revenue & Customs
Updated
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Accounting framework: annual accounting: Unearned Premium Provision (UPP): example

Motor Insurance Company Ltd has a 31.12.07 accounting period. It enters into the following contracts for motor insurance:

Contract No. Date entered into Premium
     
     
1 1/1/07 300
2 27/2/07 450
3 1/6/07 600
4 5/9/07 500
Total premiums   1,850

The UPP would be calculated as follows:

Contract No. 24ths Method UPP   365ths Method  
           
1 1/24 x 300 13   0/365 x 300  
2 3/24 x 450 56   57/365 x 450 70
3 11/24 x 600 275   151/365 x 600 248
4 17/24 x 500 354   247/365 x 500 338
Total UPP   698     656