Page 227 - Reinsurance Management IC85

Reinsurance Management

A profit commission on accounting year basis
would not be adjusted in subsequent years as long
as the treaty continues without cancellation.

"Underwriting Year" Basis
A profit commission on an "Underwriting Year"
basis requires all transactions of an underwriting
year, without reference to accounting year, to be
accounted to the same year for the purposes of
determining the profit of that underwriting year.

It is general practice, where this type of profit
commission applies, to defer the preparation of
the first statement until at least one year after
the end of the underwriting year. Readjustment
statements are then rendered in accordance with
the treaty terms until all liability has expired.

There can be a provision to close an "Underwriting
Year's" accounts after a specified period and transfer
any outstanding liability to the next open "Underwriting
Year". All subsequent transactions relating to all
preceding "Underwriting Years" are then included in

Sashi Publications - www.sashipublications.com 225

ight@ The Insurance Times. 09883398055 / 0988338