VALUATION OF LIABILITIES
—(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.
(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.
—(1) A Service Company shall calculate 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 as the sum of —
premium liabilities, which shall be an amount not less than —
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
the unexpired risk reserves, calculated as the sum of —
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
any provision for any adverse deviation from the expected experience,
whichever is the higher; and
claim liabilities, which shall be an amount not less than the sum of —
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
any provision for any adverse deviation from the expected experience.
(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 —
calculate the amount of unexpired risk reserves and claim liabilities as the amount net of reinsurance ceded —
by making separate estimates of the gross claims liabilities and recoveries from the reinsurance counterparty; and
by taking into account the likelihood of default by the reinsurance counterparty; and
take into account any non-reinsurance recovery such as salvage and subrogation.
(3) Where there is no material change in —
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
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 data on claims liabilities that are net of reinsurance.
(4) A Service Company shall make separate calculations of the unearned premium reserves, the unexpired risk reserves and the claim liabilities in the manner provided in paragraph (1) for each type of business described in Form 3 in the Fifth Schedule that is carried on by the Service Company.
(5) The amount of unearned premium reserves for a policy in respect of general business shall be —
in the case of a Service Company which underwrites risks relating to cargo policies, an amount not less than 25% of the premiums for those policies or an amount calculated on a basis not less accurate than the 1/24th method; or
in the case of a Service Company which carries on the business of reinsurance of liabilities under insurance policies —
an amount not less than 25% of the premiums in the case of marine and aviation policies and 40% of the premiums in other cases; or
an amount calculated on a basis not less accurate than the 1/24th method.
(6) The amount of unearned premium reserves for a policy in respect of general business shall be calculated —
where the 1/24th method or some other more accurate method is used, using an amount of premiums written which is reduced by the actual commissions payable; or
in any other case, using an amount of premiums written without any deduction for commissions payable therefrom.
(7) In paragraph (5) —
“marine and aviation policies” means a policy of insurance —
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;
upon the freight of, or any other interest in or relating to vessels, aircraft or other means of conveyance;
upon vessels or aircraft, or upon machinery, tackle furniture or equipment of vessels or aircraft;
against damage arising out of or in connection with the use of vessels or aircraft, including third-party risks; or
against risks incidental to the construction, repair or docking of vessels, including third-party risks;
“premiums” means the amount of the premiums written in the accounting period after deducting for any premium refund and any payment in respect of reinsurance and retrocession.