GROUP ACCOUNTING POLICIES (continued) development year is required. The calculation considers 6 development years. The first development year is the 12 months immediately preceding the first development year, etc. The risk factors used correlate to a best estimate IBNR plus a risk margin. The implicit risk margin is expected to result in an IBNR at the 75th percentile. The IBNR reserves for all segmentations are held so as to be at least sufficient at the 75th percentile of the ultimate cost distribution. The appropriate reinsurance structures are applied to the gross IBNR to calculate the reinsured portion of the IBNR. Adjustments to the amounts of claims provisions established in prior underwriting years are reflected in the Financial Statements for the year in which the adjustments are made. Reinsurance contracts outwards Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more insurance contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. Reinsurance premiums Reinsurance premiums are recognised as an expense in the Statement of Profit or Loss and Other Comprehensive Income when they become due for payment in terms of the contracts at the undiscounted amounts payable in terms of the contract. Reinsurance claims The benefits to which the Group are entitled under its reinsurance contracts held are recognised as reinsurance assets, which are dependent on the expected reinsurance claims and benefits arising under the related reinsured insurance contracts. These assets consist of short-term balances due from reinsurers (classified as insurance and other receivables) and long-term receivables (classified as reinsurance assets) that are calculated based on the gross OCR and IBNR reserves. Amounts recoverable from or due to reinsurers are measured in terms of each reinsurance contract. Reinsurance UPR The reinsurers’ share of unearned premiums represents the portion of the current year’s outward reinsurance premiums that relate to risk periods covered by the related reinsurance contracts extending into the following year. The reinsurers’ share of unearned premium is calculated using the 365th method. Reinsurance Commission Revenue/Deferred Revenue Liability Income from reinsurance contracts ceded, that varies with and is related to obtaining new reinsurance contracts and renewing existing reinsurance contracts, is deferred over the period of the related reinsurance contracts and is recognised as a current liability. Reinsurance assets Reinsurance assets are assessed for impairment at each statement of financial position date. A reinsurance asset is deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due, and that event 4. Insurance and investment contracts (continued) 4.2 Valuation and recognition (continued) 4.2.2 Short-term insurance contracts (continued) 114 Group Accounting Policies
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