Page 38 - Insurance Times July 2022

succeeding accounting period is maintained based on the premium under insurance contract liabilities for subsequent
above method except in Marine Hull business and risks, if any, to be borne by the Company.
reinsurance acceptances under the Pool arrangements.
Unexpired Risk Reserve for Marine Hull business and Liberty General Insurance
reinsurance acceptances in respect of Terrorism Pool is
Revenue recognition Premium including re-insurance
maintained at hundred percent of net premium and in accepted (other than Motor long term Insurance policies)
respect of all other reinsurance acceptances under pool
is recognized as income over the contract period or the
arrangements at fifty percent of the net premium during period of risk (1/365 method) whichever is appropriate on
the preceding twelve months.
gross basis net of Goods and Services Tax.
Premium deficiency is recognized whenever expected claim
Reserve for unexpired risk represents that part of the net
costs, related expenses and maintenance costs exceeds
premium (i.e., premium, net of reinsurance ceded) in
related reserve for unexpired risks for each segment of
respect of each line of business which is attributable to, and
business. set aside for, subsequent risks to be borne by the Company
under contractual obligations on contract period basis or risk
Kotak Mahindra period basis (1/365 method), whichever is appropriate. In
Premium earnings are recognised over the period of the case of premium retro ceded by the Terrorism pool, reserve
policy or period of risk. for unexpired risk is created at 50% of the retro ceded
premium (net of XOL premium) during the year
Reserve for Unexpired Risk Reserve for unexpired risk is
recognised net of reinsurance ceded and represents Premium deficiency is recognised at Company level if the
premium written that is attributable and to be allocated to ultimate amount of expected net claim costs and related
succeeding accounting periods for risks to be borne by the expenses and maintenance costs on unexpired period of the
Company under contractual obligations over a contract inforce policies exceed the related reserve for unexpired
period or period of risk, whichever is applicable. As per risks carried forward to subsequent accounting period. The
circular vide IRDAI/F&A/CIR/CPM/056/03/2016 dated April 4, Company considers maintenance cost as relevant cost
2016 such reserves are calculated on a pro-rata basis under incurred for ensuring claims handling operations. The
1/365 basis subject to 100% for marine hull business, on all Premium deficiency is calculated and duly certified by the
unexpired policies at Balance Sheet Date. Appointed Actuary.

Premium deficiency is recognized when sum of expected As on 31st March 2020, as per IRDA (Assets Liabilities and
claim costs, related expenses and maintenance costs Solvency Margin of General Insurance Business) premium
exceeds related reserve for unexpired risks. It is done on deficiency has been calculated at segmental level but
annual basis and at segment revenue account level viz. Fire recognised at the company level.
Marine and Miscellaneous for each segment of business.
Premium income recognised based on varying risk pattern
Premium deficiency reserve is estimated and certified by the
is Nil.
Appointed Actuary.
Magma HDI
In accordance with master circular and corrigendum on
Reinsurance premium is ceded on unearned premium is
master circular on Preparation of Financial Statements
issued by IRDAI vide circular No. IRDA/F&A/CIR/FA/231/10/ carried forward to the period of risk and is set off against
related unearned premium.
2012 dated 5th October 2012 and Circular No IRDA/F&A/
CIR/FA/126/07/2013, dated 3rd July 2013, respectively, in
Premium on longterm policies is accounted as premium
respect of calculation and recognition of premium deficiency,
received in advance.
the company does not require to make any provision for
premium deficiency reserve during the current year (Previous
Reserve for unexpired Risks : is made on the amount
year : Nil)
representing that part of the net premium written which is
attributable to and be allocated to the subsequent
Terrorism Pool : The entire amount of reinsurance accepted
accounting period, using 1/365 method
for the current year on this account net of claims and
expenses up to the above date has been carried forward to Reserve for premium deficiency : In accordance with IRDAI
subsequent accounting period as changes in unearned Circular premium deficiency is recognised at segmental

38 The Insurance Times, July 2022