Annual report 2009, Territory Insurance Office
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Territory Insurance Office (N.T.); Territory Insurance Office (N.T.) -- Periodicals; Insurance, Accident -- Northern Territory; Insurance, Automobile -- Northern Territory; Insurance, No-fault Automobile -- Northern Territory
Territory Insurance Office
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Territory Insurance Office Notes to the Financial Statements 30 June 2009 TIO Annual Report 2008/2009 31 premiums written in the year over the periods of indemnity from the attachment of risk, and is treated as a liability on the balance sheet at the reporting date. Reinsurance and other recoveries receivable Reinsurance and other recoveries receivable on paid claims, reported claims not yet paid, claims incurred but not reported and unexpired risk liabilities are recognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment of outstanding claims. Recoveries receivable in relation to "long-tail" classes are measured as the present value of the expected future receipts, calculated on the same basis as the provision for outstanding claims. The details of discount and inflation rates applied are included in note 3. Interest, fees and commission Interest income is recognised on an accrual basis. Banking related fees and commissions are brought to account on an accrual basis whilst loan establishment fees are brought to account over the estimated average life of the loan on an effective interest rate basis. Rental revenue Rental revenue is recognised as income on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. b) Unexpired risk liability The adequacy of the unearned premium liability is assessed by considering current estimates of all expected future cash flows relating to future claims covered by current insurance contracts. This assessment is referred to as the liability adequacy test and is performed separately for each group of the contracts subject to broadly similar risks and managed together in a single portfolio. If the unearned premium liability less related intangible assets and related deferred acquisition costs is exceeded by the present value of the expected future cash flows relating to future claims plus the additional risk margin to reflect the inherent uncertainty in the central estimate, then the unearned premium liability is deemed to be deficient. TIO applies a risk margin to achieve the same probability of sufficiency for future claims as is achieved on the outstanding claims liability. The entire deficiency, gross and net of reinsurance is recognised immediately in the income statement. The deficiency is recognised first by writing down any related intangible assets and then related deferred acquisition costs, with any excess being recorded in the balance sheet as an unexpired risk liability. c) Outwards reinsurance Premium ceded to reinsurers is recognised as an expense in the income statement from the attachment date over the period of indemnity of the insurance contract in accordance with the pattern of reinsurance protection received. Where appropriate, an unearned portion of outwards reinsurance is treated at the reporting date as an asset.