Calculate Reserves

If you want the SICS to calculate the Reserve, the conditions must be defined. Refer to Reserve conditions. Conditions must be equal for all Retrocessionaire’s (no special Reserve condition).

Calculate Premium Reserves #

Premium Reserve, if defined, is calculated according to the frequency defined on the conditions. The Premium Reserve cannot be calculated more frequent than the Accounts. If Premium Portfolio Withdrawal is defined the Premium Reserve booked for the Insured Period will be reversed when running the last Account of the Insured Period. If no Premium Portfolio Withdrawal condition is defined, the Premium Reserve will not be reversed.

Premium Reserve is booked on a movement basis (no Premium Reserve out/in is booked).

Available calculation methods are;

None

No calculation of Premium Reserve is performed.

Percent of Original

All bookings with Entry Codes within the Entry Code Sub Category Original Premium Reserve are multiplied with the Share of the Retrocessionaire’s and the percentage entered on the Premium Reserve condition. The results of the calculations are booked on the Retrocessionaire’s Business Ledger As Booking with the original Entry Codes.

Which Entry Codes is part of the Entry Code Sub Category Original Premium Reserve is decided by your System Administrator.

Example:

Retrocessionaire’s Share = 10%

*) Entry Codes in Entry Code Sub Category Original Premium Reserve

Transfer Premium Reserve to the next Insured Period
It is possible to have the Premium Reserve, when Percent of Original, transferred to the next Insured Period. This is possible by selecting the field Transfer to next Insured Period and when the Premium Accounting Basis is Clean Cut;

• Total Premium Reserve booked in the Insured Period being closed (i.e. when running the last account of the Insured Period) is rebooked in the next Insured Period.
• Rebooking of the Premium Reserve is made on the OCC and ORP ‘as Booking’ business ledgers.
• ORP Premium Reserve rebooked is adjusted according to the ORP share registered in the next Insured Period
• Only Premium Reserves booked with Entry Codes within the Entry Code Sub Category Original Premium Reserve are being rebooked. Percent of Premium

All Premium bookings according to the Entry Code Group selected as calculation basis on the condition are multiplied with the Share of the Retrocessionaire’s and the Premium Reserve percentage. The result of the calculation is booked on the Business Ledger As Booking with the Entry Code defined in the system parameter Entry Code Usage, Calculation Premium Reserve by your System Administrator.

Which Entry Codes is part of the Entry Code Group within the Entry Code Group Category Subject Premium Income, your System Administrator decides Proportional.

Note! Premium Reserve calculated as a percentage of the Premium is using the Premium for one Accounting Year as the basis for the calculation; For example, when running the 1^stHalf-year Account for the Accounting Year 2, the Premium basis for the calculation is the Premium booked in the 1^st Half-year Account, Accounting year 2 and the 2^ndHalf-Year Account, Accounting Year 1.

Example 1:

Entry Code defined for Calculation Premium Reserve = ‘81’
Retrocessionaire’s Share = 10%
Premium Reserve = 40%

*) Entry Codes in Entry Code Sub Category Premium

**) The Premium Basis is dependent on the definition of the selected Entry Code Group. Refer to Category Subject Premium Income, Proportional(In this example 10 and PREM)

Example 2:

Bookings on Retrocessionaire’s Business Ledger (conditions same as in Example 1).

*) Calculated as: (15.000 + 8.000) x 40% = 9.200 - 10.000 = -800

**) Calculated as: (8.000 + 12.000) x 40% = 8.000 - 9.200 = -1.200

Transfer Premium Reserve to the next Insured Period
It is possible to have the Premium Reserve, when Percent of Premium, transferred to the next Insured Period. This is possible by selecting the field Transfer to next Insured Period and when the Premium Accounting Basis is Clean Cut;

• Total Premium Reserve booked in the Insured Period being closed (i.e. when running the last account of the Insured Period) is rebooked in the next Insured Period.
• Rebooking of the Premium Reserve is made on the OCC and ORP ‘as Booking’ business ledgers.
• ORP Premium Reserve rebooked is adjusted according to the ORP share registered in the next Insured Period
• Only Premium Reserves booked with Entry Codes within the Entry Code Sub Category Original Premium Reserve are being rebooked. Pro Rata Temporis

All Premium bookings on the OCC ‘as Original’ business ledger, according to the Entry Code Group selected as calculation basis on the condition, are multiplied with the Share of the Retrocessionaire’s and based on this, the Premium Reserve is calculated. For the Pro Rata Temporis calculation method the system is using the As of Date on the Retrocession Calculation Order and compare this date with the Accounting Period From date and Accounting Period To date of the basis premium on the OCC ‘as Original’ ledger. The Premium Reserve booked in one account is reversed in the next account (either when running the account for the same Accounting Period, but with a higher As of Date or the account for the next Accounting Period). The following scenarios may apply;

1. The As of Date on the order is lower than the Accounting Period From Date of the source business/OCC ‘as Original’ premium detail. Here the premium basis amount is multiplied with 1
   Example 1:
   As of Date on Retrocession Calculation Order = 31.12.2017
   Premium -50
   Accounting Period From - To = 01.01.2018 - 31.03.2018
   Since the As of Date on the order is lower than the Accounting Period From Date of the OCC ‘as Original’ premium detail, the Premium Reserve is calculated;
   (-50 * 1) * -1 = 50
   

2. The As of Date on the order is higher than the Accounting Period From Date and lower or equal to the Accounting Period To Date of the OCC ‘as Original’ premium detail. Here the premium basis amount is multiplied with the number of days between (Accounting Period To - As of Date) / (Accounting Period To Date - Accounting Period From Date + 1 Day)
   Example 2a:
   As of Date on Retrocession Calculation Order = 31.01.2018
   Following premium details are booked on the source business and retroceded to the OCC ‘as Original’ business ledger
   Premium -50
   Accounting Period From - To = 01.01.2018 - 31.03.2018
   Since the As of Date is higher than the Accounting Period From Date, but less than or equal to the Accounting Period To Date, the premium reserve is calculated as;
   [-50 * (31.03.2018 - 31.01.2018) / (31.03.2018 - 01.01.2018 + 1)] * -1
   (-50 * 59/90) * -1 = 32,78
   
   Example 2b:
   As of Date on Retrocession Calculation Order = 31.01.2018
   Following premium details are booked on the source business and retroceded to the OCC ‘as Original’ business ledger
   Premium -50
   Accounting Period From - To = 01.01.2018 - 31.12.2018
   Since the As of Date is higher than the Accounting Period From Date, but less than or equal to the Accounting Period To Date, the premium reserve is calculated as;
   [-50 * (31.12.2018 - 31.01.2018) / (31.12.2018 - 01.01.2018 + 1)] * -1
   (-50 * 334/365) * -1 = 45,75
   
   

3. The As of Date on the order is higher than the Accounting Period To Date of the source business/OCC ‘as Original’ premium detail. Here the premium basis amount is multiplied with 0.
   Example 3:
   As of Date on Retrocession Calculation Order = 30.04.2018
   Premium -50
   Accounting Period From - To = 01.01.2018 - 31.03.2018
   Since the As of Date on the order is higher than the Accounting Period To Date of the OCC ‘as Original’ premium detail, the premium reserve is calculated as;
   (-50 * 0) * -1 = 0 (i.e. no Premium Reserve is booked)
   

The result of the calculation is booked on the Business Ledger As Booking with the Entry Code defined in the system parameter Entry Code Usage, Calculation Premium Reserve by your System Administrator.

Percent Table

All Premium bookings according to the Entry Code Group selected on the condition as calculation basis are multiplied with the Share of the Retrocessionaire’s Participation and the Premium Reserve percentage. The Premium Reserve percentage is according to the definition of the selected table. In the table, different Percent Values may be defined for the Year Numbers (Accounting Years) of the Insured Period. Calculation of the Premium Reserve is according to the following formulas;

‘x’% of Premium booked in each Accounting Period of current Accounting Year ‘n’ plus

‘x’% of Premiu m booked in each Accounting Period of current Accounting Year ‘n-1’ plus

‘x’% of Premium booked in each Accounting Period of current Accounting Year ‘n-2’ plus

‘x’% of Premium booked in each Accounting Period of current Accounting Year ‘n-3’ plus

…. continues according to the number of years defined in the table

The result of the calculation is booked on the Business Ledger As Booking with the Entry Code defined in the system parameter Entry Code Usage, Calculation Premium Reserve by your System Administrator. Premium Reserve is booked on a movement basis.

Which Entry Codes is part of the Entry Code Group within the Entry Code Group Category Subject Premium Income, your System Administrator decides Proportional.

Which Percent Values are entered for the various Year Numbers in the System Parameter Percent Table is decided by your System Administrator.

Example:
Premium Reserve = Percent table
Cal. Frequency = Yearly
Percent Table

Example of Premium Reserve booked on the Business Ledger of the Retrocessionaire. Example is for one Insured Period only.

*) The total row shows cumulated Premium Reserve after the Accounting Year shown in the column above, to the left.

**) Only the Premium Reserve movement amount is booked on the Retrocessionaire’s Business Ledger.

***) Premium booking for current accounting year. (Other premiums are booked in previous accounting years.)

Calculate Original Deduction Reserve/Additional Comission Reserve

(Calculate Deduction on Cost)

The Original Deduction Reserve and Additional Comission Reserve including Deduction on Cost is calculated when you select the calculation method Calculate Deduction on Cost and also select the corresponding Calculate Deduction on Cost check box. The Premium Basis must be any Entry Code Group including Entry Codes for both Premium and Deductions. Which Entry Codes is part of the Entry Code Group within the Entry Code Group Category Subject Premium income Proportional is decided by your System Administrator.

The deduction reserves arecalculated according to the following formula;
Original Premium Reserve * Deductions/Premiums * Deduction On Costs %

Explanation of items in formula;

Original Premium Reserve = sum of all Premium Reserve bookings on the Retrocessionaire’s Business Ledger within the Entry Code Sub Category Original Premium Reserve Deductionsare all bookings on the Retrocessionaire Business Ledger within the Entry Code Sub Categories Original Commission and Overriding Commission. In addition, all Entry Codes according to the selected Entry Code Group in the field Premium Basisnotidentified as Premiums. Premiumsare all bookings on the Retrocessionaire Business Ledger within the Entry Code Sub Categories Premium, Natural Catastrophe Premium and Reinstatement Premium Deduction on Costs%is the percentage your system administrator has defined in the system parameters for the entry code usage calculation deduction reserve and/or additional commision reserve. It is also possible to have the Original Deduction Reserve calculated if the Premium and the Deduction amounts are not booked on the Retrocessionaire’s Business Ledger. This functionality is activated by the system parameter Calculate Original Premium Reserve using Commission Percentage. If the system parameter is selected, the Original Commission Reserve is calculated according to following formula;

Original Premium Reserve * Deduction% * Deduction on Costs%

Deduction %is the Commission % value defined in the Commission field in Deduction Conditions

The deduction reserve amounts are booked on the retrocessionaire’s business ledger with the entry code defined by your system administrator for the entry code usage calculations Deduction Reserve and Additional Reserve . If manual bookings of deduction reserves are made to the retrocessionaire’s business ledger, the calculated deduction reserve amounts will be adjusted accordingly.

Example 1:

Premium Reserve = Calculate Deduction on Cost
Basis Premium = Entry Code Group Net Premium
Deduction on Costs% = _92,5
_ Definition of Net Premium

Calculation of Original Deduction Reserve when following bookings made on the Business Ledger of the Retrocessionaire.

a) Included in Premium Basis Net Premium

b) Included in calculation because included in Entry Code Sub Category Premium

c) Notincluded in calculation because not entered in Entry Code Group Net Premium and not within one of the Entry Code Sub Categories; Premium, Natural Catastrophe Premium and Reinstatement Premium

d) Included in calculation because included in Entry Code Sub Category Overriding Commission

e) Calculated according to formula;

6.000 * (3.000 + 500 + 1.000) / (-10.000 + -5.000) * 92,5% = - 1.665

Example 2:

Commission % = 20%

The System parameter ‘Calculate Original Premium Reserve using Commission Percentage’ is selected.

The conditions from example 1 are otherwise the same.

Calculation of Original Deduction Reserve when following bookings made on the Business Ledger of the Retrocessionaire.

a) Calculated according to formula: 6.000 * 20% * 92,5% * -1= -1.110,-

Calculate Deduction on Cost on Non-Cumulative Basis #

The Deduction on Cost may be calculated on non-cumulative basis, meaning the basis for the calculation is Entry Codes included in the current Account only. Refer to field ‘Calculate on Non-Cumulative Basis’. When this field is selected, also another field ‘Basis Deduction on Cost’ is being enabled. This field is used to decide which Entry Codes are the basis for the non-cumulative calculation of Deduction on Cost (refer to Entry Code Group Category ‘Basis for Deduction on Cost’) .

When the Deduction on Cost is to be calculated on non-cumulative basis, the Deduction Method for the Commission/Overriding Commission defines whether the original Deduction on Cost (i.e. bookings made on source business with Entry Codes within the Entry Code Sub Category ‘Original Deduction Reserve’) will be retroceded or not. If Deduction Method is ‘Original’or ‘Original + Percent’, the original Deduction on Cost made on source business will be retroceded to the Retrocessionaire Participations. If Deduction Method is e.g. ‘Percent’ or another value (except ‘‘Original’or ‘Original + Percent’), no original Deduction on Cost will be retroceded to the Retrocessionaire Participations.

Calculate Loss Reserve #

Loss Reserve, if defined, is calculated according to the frequency defined on the conditions. The Loss Reserve cannot be calculated more frequent than the Accounts. If Loss Portfolio Withdrawal is defined the Loss Reserve booked for the Insured Period will be reversed when running the last Account of the Insured Period. If no Loss Portfolio Withdrawal condition is defined, the Loss Reserve will not be reversed.

Loss Reserve is booked on a movement basis (no Loss Reserve out/in is booked).

Available calculation methods are;

None

No calculation of Loss Reserve is performed.

Percent of Original

All bookings with Entry Codes within the Entry Code Sub Category Original Loss Reserve are multiplied with the Share of the Retrocessionaire’s and the percentage entered on the Loss Reserve condition. The results of the calculations are booked on the Retrocessionaire’s Business Ledger As Booking with the original Entry Codes.

Which Entry Codes is part of the Entry Code Sub Category Original Loss Reserve is decided by your System Administrator.

Example:

Retrocessionaire’s Share = 10%

*) Entry Codes in Entry Code Sub Category Original Loss Reserve

Transfer Loss Reserve to the next Insured Period
It is possible to have the Loss Reserve, when Percent of Original, transferred to the next Insured Period. This is possible by selecting the field Transfer to next Insured Period and when the Claim Accounting Basis is Clean Cut;

• Total Loss Reserve booked in the Insured Period being closed (i.e. when running the last account of the Insured Period) is rebooked in the next Insured Period.
• Rebooking of the Loss Reserve is made on the OCC and ORP ‘as Booking’ business ledgers.
• ORP Loss Reserve rebooked is adjusted according to the ORP share registered in the next Insured Period
• Only Loss Reserves booked with Entry Codes within the Entry Code Sub Category Original Loss Reserve are being rebooked.