Page 29 - Insurance Times July 2022

UNDERSTANDING

THE NUANCES OF

UNEXPIRED RISK

RESERVES OF NON-

LIFE INSURERS

Abstract
Non-life Insurance as a commercial venture has many peculiarities, which are not common to other commercial
endevaours. Good Faith, Indemnity, Insurable Interest and Proximate Cause are some such fundamental unique
concepts which form the foundations of insurance service. There are also concepts like Sum insured, Retroactive
date, Reporting period (claims), Claims made basis etc., which sound quite unfamiliar even to a man of commerce,
leave alone a common man. These peculiarities of Non-life Insurance have given rise to some unusual financial concepts
and practices. To name a few of them - Outstanding Claims, Claims Incurred But Not Reported and Incurred But Not
Enough Reported, Policyholder and Shareholder Funds, Apportionment of Investment Income, Catastrophic Reserves,
Equalisation Reserves etc. One more such distinct concept goes by the name "Unexpired Risk Reserves". This article
attempts to present the concept of "Unexpired Risk Reserves "in all its hues and to present the role and importance
of these reserves in the financial health of a Non-life Insurer. Certain observations on the summary Annexures A &
B relating to reserving status and practices of Indian Non-life Insurers are made, which might deserve the attention
of the regulatory authorities and authorities of the Insurers, for improving the quality of reserves and related
disclosures.

A. Introduction
About the author
Non-life Insurance service is contingent in nature, depending
S H Gejji on the occurence / non-occurence of an unfortunate event,
Post Graduate in Commerce. - M.com in which the customer might suffer. An alternate description
Degree in Law. - LLB(General) for this service is "risk transfer" - Insurer takeover the
Fellow of Insurance Institute of India. - FIII
customers' risk for a consideration called premium, In view
The Insurance Times, July 2022 29