PART IIIB | RECOGNITION AND VALUATION OF LIABILITIES |
[S 839/2018 wef 01/01/2019] | 13K. This Part applies to the recognition and valuation of any liability of an insurance fund established and maintained under regulation 11(1). [S 814/2004 wef 01/01/2005] [S 839/2018 wef 01/01/2019] |
| Recognition and valuation of liabilities |
13L.—(1) Unless otherwise specified in this Part, a Service Company shall value any liability of an insurance fund in accordance with the Accounting Standards and sound actuarial principles.| (1A) Unless otherwise specified in regulation 13M or in any direction issued under the Act, any liability of an insurance fund is to be recognised by a Service Company in accordance with the Accounting Standards. [S 839/2018 wef 01/01/2019] |
| (2) The Authority may, by notice in writing to a Service Company, specify the bases, methodologies and other details of a technical nature to be complied with in relation to the determination of liabilities in respect of a policy and in respect of an insurance fund. [S 814/2004 wef 01/01/2005] |
[S 839/2018 wef 01/01/2019] |
| Recognition, valuation and calculation of liabilities of general business |
13M.—(1) A Service Company shall recognise the liabilities in respect of policies of an insurance fund established and maintained under regulation 11(1) for the general business written by the Service Company and by any coverholder authorised by the Service Company, on behalf of the members of a syndicate, valued or calculated (as the case may be) as the sum of —| (a) | premium liabilities, which shall be an amount not less than —| (i) | the unearned premium reserves of the fund calculated as the aggregate of unearned premium reserves for each policy of the fund determined in the manner provided in paragraph (5); or | | (ii) | the unexpired risk reserves, calculated as the sum of —| (A) | the value of the expected future payments arising from future events insured under policies in force as at the valuation date, including any expense expected to be incurred in administering the policies and settling relevant claims; and | | (B) | any provision for any adverse deviation from the expected experience, |
| whichever is the higher; and |
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| | (b) | claim liabilities, which shall be an amount not less than the sum of —| (i) | the value of the expected future payments in relation to all claims incurred prior to the valuation date (other than payments which have fallen due for payment on or before the valuation date), whether or not they have been reported to the Service Company, including any expense expected to be incurred in settling those claims; and | | (ii) | any provision for any adverse deviation from the expected experience. [S 180/2015 wef 01/04/2015] |
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[S 839/2018 wef 01/01/2019] (2) In determining the unexpired risk reserves referred to in paragraph (1)(a)(ii) and claim liabilities referred to in paragraph (1)(b), a Service Company shall —| (a) | calculate the amount of unexpired risk reserves and claim liabilities as the amount net of reinsurance ceded —| (i) | by making separate estimates of the gross incurred claims and recoveries from the reinsurance counterparty; and [S 665/2010 wef 04/11/2010] | | (ii) | by taking into account the likelihood of default by the reinsurance counterparty; and |
| | (b) | take into account any non-reinsurance recovery such as salvage and subrogation. |
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(3) Where there is no material change in —| (a) | the manner in which liabilities are reinsured during the period to which the data used to determine the unexpired risk reserves and claim liabilities relates; and | | (b) | the manner in which liabilities are reinsured at valuation date, |
| a Service Company may, instead of complying with paragraph (2)(a), calculate the amount of unexpired risk reserves and claim liabilities net of reinsurance ceded using claims data that are net of reinsurance. |
[S 665/2010 wef 04/11/2010] |
(4) A Service Company shall make separate calculations of the premium liabilities, the unexpired risk reserves and the claim liabilities for each line of business described in Form G1 that is carried on by the Service Company and by any coverholder authorised by the Service Company, on behalf of the members of a syndicate, and such calculations shall be made in the following manner:| (a) | the premium liabilities shall be an amount not less than the unexpired risk reserves; | | (b) | the unexpired risk reserves shall be calculated as the sum of —| (i) | the value of the expected future payments arising from future events insured under policies in force as at the valuation date, including any expense expected to be incurred in administering the policies and settling relevant claims; and | | (ii) | any provision for any adverse deviation from the expected experience, |
| after allowing for the effect of diversification, if any, at the level of the relevant insurance fund under paragraph (1)(a)(ii); and |
| | (c) | the claim liabilities shall be an amount not less than the sum of —| (i) | the value of the expected future payments in relation to all claims incurred prior to the valuation date (other than payments which have fallen due on or before the valuation date), whether or not they have been reported to the Service Company, including any expense expected to be incurred in settling those claims; and | | (ii) | any provision for any adverse deviation from the expected experience, |
| after allowing for the effect of diversification, if any, at the level of the relevant insurance fund under paragraph (1)(b). |
[S 665/2010 wef 04/11/2010] [S 180/2015 wef 01/04/2015] |
[S 839/2018 wef 01/01/2019] |
(5) The amount of unearned premium reserves for a policy in respect of general business shall be —| (a) | subject to sub-paragraphs (b) and (c) and paragraph (6), an amount calculated on a basis not less accurate than the method; | | (b) | in the case of a Service Company and any coverholder authorised by the Service Company which underwrite risks, on behalf of the members of a syndicate, relating to cargo policies, an amount not less than 25% of the net premiums written in the accounting period for those policies or an amount calculated on a basis not less accurate than the method; or[S 665/2010 wef 04/11/2010] [S 180/2015 wef 01/04/2015] | | (c) | in the case of a Service Company and any coverholder authorised by the Service Company which carry on, on behalf of the members of a syndicate, the business of reinsurance of liabilities under insurance policies —| (i) | an amount not less than 25% of the net premiums written in the accounting period in the case of marine and aviation policies and 40% of the net premiums written in the accounting period in other cases; or [S 665/2010 wef 04/11/2010] | | (ii) | an amount calculated on a basis not less accurate than the method.[S 180/2015 wef 01/04/2015] |
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(6) The amount of unearned premium reserves for a policy in respect of general business shall be calculated —| (a) | where the method or some other more accurate method is used, using an amount of net premiums written which is reduced by the actual commissions payable; or[S 665/2010 wef 04/11/2010] | | (b) | in any other case, using an amount of net premiums written without any deduction for commissions payable therefrom. [S 665/2010 wef 04/11/2010] |
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(7) In paragraphs (5) and (6) —“marine and aviation policies” means policies of insurance —| (a) | upon goods, merchandise or property of any description transported on board vessels, aircraft or other means of conveyance, including incidental transit before and after shipment; | | (b) | upon the freight of, or any other interest in or relating to vessels, aircraft or other means of conveyance; | | (c) | upon vessels or aircraft, or upon machinery, tackle furniture or equipment of vessels or aircraft; | | (d) | against damage arising out of or in connection with the use of vessels or aircraft, including third-party risks; or | | (e) | against risks incidental to the construction, repair or docking of vessels, including third-party risks; |
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| “net premiums written” means the net amount of premiums after deduction of return premiums and payments in respect of reinsurance business ceded. [S 814/2004 wef 01/01/2005] [S 665/2010 wef 04/11/2010] |
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[S 839/2018 wef 01/01/2019] |
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