Download History of Insurance

ACCOUNTING IN INSURANCE
COMPANIES
Buğra KUNTER
Büşra ALTUNTAŞ
Eda TÜRKİŞ
Meltem ÖZYURT
Şeyda GÖKKAYA
What is insurance ?
• Insurance, is a form of risk management
primarily used to hedge against the risk of
a contingent loss. Insurance is defined as
the equitable transfer of the risk of a loss,
from one entity to another, in exchange for
a premium, and can be thought of as a
guaranteed small loss to prevent a large,
possibly devastating loss.
History of Insurance
• Insurance in the modern sense (i.e.,
insurance in a modern money economy, in
which insurance is part of the financial
sphere), early methods of transferring or
distributing risk were practised by
Babylonian traders as long ago as the 2nd
millennium BC
History of Insurance
• The earliest authenticated insurance contract
(i.e. That which displays the characteristics of
insurance in the sense of a transfer of risk of
loss due to a fortuitous uncertain event in lieu of
payment of consideration / premium), is a
marine insurance contract on a ship “The Santa
Clara” dated 1347 in Genoa. The policy is in the
Italian language and appears in the form a
maritime loan to avoid the canon (church)
prohibition against usury.
History of Insurance in Turkey
• The history of insurance in Turkey dates back to
1870’s. In those years, insurance transactions
and services were mainly carried out by foreign
insurance companies. In 1900, insurance
companies operating in Turkey decided to come
together under the umbrella of a “professional
organization” and established the “Insurers
Syndicate of Turkey”, which had 81 members, all
of them being foreign companies.
History of Insurance in Turkey
• 1924 – The Club of Insurers – ( then took
name Central office of Insurers)
• 1952 -The Association of the Insurance
Companies of Turkey ( established by
somem members of Central Office)
• 1952 – At the same date Central Office of
Insurers took the name “Office of Insurers
of Turkey
History of Insurance in Turkey
• In 1954, both organizations merged under
the name “Association of the Insurance
and Reinsurance Companies of Turkey”.
In 1975, the Association adopted the name
that it uses today; “The Association of the
Insurance and Reinsurance Companies of
Turkey”.
History of Insurance in Turkey
• Within the context of the Insurance
Supervision Law, No:5684 which came
into force in 2007, the Association is a
legal entity established for the
development of the insurance profession,
empowerment of solidarity among
insurance companies and elimination of
unfair competition among members
Insurance in Turkey
• In Turkey we can classify types of
insurance in 12 categories , 11 of them
non – life and the other is life.The
Association of the Insurance and
Reinsurance Companies of Turkey has
established the following committees to
facilitate the preparation and revision of all
legislation, tariffs, working guides and
general clauses relating to insurance;
Insurance in Turkey
•
•
•
•
•
•
•
•
•
•
•
•
Marine Insurance
Casualty Insurance
Non-life Claims
Engineering Insrance
Health Insurance
Liability Insurance
Agriculture Insurance
Financial and Accounting
Education and Publicity
Law and Legal Protection
Fire Insurance
Life Insurance
Basic Terms of Insurance
Insurance Policy: It is the document or wording, which states the
full details of the insurance contract between the policyholder and
insurer.
Premium : The amount paid by the policyholder to the insurer for
insurance.
Commission : The payment by an insurance company to an agent
or broker or intermediary for the work involved in arranging
insurance and providing on-going service to the client.
Reinsurance: Reinsurance is insurance purchased by insurers from
other insurers to limit the total loss an insurer would experience in
case of a disaster.
Coinsurance : When more than one insurer covers a risk, each
insurer decides which part of the risk that will underwrite and on
what terms. They do not have to follow any other co-insurer.Each
co-insurer seperately insures their part of the risk and each is a
seperate contract.
TFRS 4
• Communiqué Concerning Insurance Accounting Plan and
Explanations No:1 which was issued by the Undersecretariat of
Treasury defines the purpose of TFRS 4 as below.
• The purpose of this regulation is to allow for the preparation of
uniform financial statements in the insurance sector; to monitor the
obligation fulfillment and financial powers of companies; to ensure
uniformity in the accounting records and reporting of insurance and
reinsurance companies along with those of pension companies and
to transform the financial states and development of both the
insurance sector and the insurance and reinsurance companies
together with pension companies to a state where they can be
monitored and evaluated in the best manner possible through
establishing an infrastructure that will ensure sound and
comparable information generation and flow.
Insurance Accounting Plan
CLASS CODE
ACCOUNT CLASSES
1
CURRENT ASSETS
2
NON-CURRENT ASSETS
3
SHORT TERM OBLIGATIONS
4
LONG TERM OBLIGATIONS
5
EQUITY CAPITAL
6
REVENUE STATEMENT ACCOUNTS
7
NON-LIFE BRANCHES TECHNICAL REVENUE STATEMENT
8
-
9
REGULATING ACCOUNTS
Income Statement of Insurance
Companies
• Consists of two basic parts, which are the
Technical Section and the Nontechnical Section.
• The Technical Section includes Non-life
Insurance’s Technical Revenue and Expense
and Life Insurance’s Technical Revenue and
Expense.
• The Nontechnical Section includes the investing
revenue & expense, revenue & expense from
other operations, extraordinary revenue &
expenses and Profit or Loss For the Period.
Accounting of Provisions
•
•
•
•
•
•
•
•
•
•
•
Today the risk that financial institutions and finance sector faces is more devastating
than the risk that any other sector faces. It influences the whole economy, that is why
the finance sector is highly regulated.
The easiness and the efficiency of applicability and the measurability of its effects
are the main reasons for the usage of provisions as a financial constraint.
The provisions below are insurance specific provisions.
35
INSURANCE TECHNICAL PROVISIONS
350
PROVISIONS FOR NON-ACQUIRED PREMIUMS – NET
351
PROVISIONS FOR CONTINUING RISKS - NET
352
MATHEMATICAL PROVISION FOR LIFE INSURANCE - NET
353
PROVISION FOR OUTSTANDING LOSS AND
COMPENSATIONS - NET
354
PROVISION FOR BONUSES AND DISCOUNTS - NET
355
PROVISION ALLOCATED FOR POLICIES BELONGING TO
INVESTMENT RISK LIFE INSURANCE POLICY HOLDERS NET
359
OTHER TECHNICAL PROVISIONS - NET
350 PROVISIONS FOR NONACQUIRED PREMIUMS
• Consists of the premiums which belongs to the
next period, but written in the current period.
• Written Premium Income: The sum of the
policy premiums of which start and renewal
dates belongs to the current year.
• NON-ACQUIRED PREMIUMS =
Number of Days in the next period X Policy Premium
Total Days of the Policy
• Provisions for each policy has to be calculated
separately.
351 PROVISIONS FOR
CONTINUING RISKS
• This provision is used when the provision
for non-acquired premiums is not enough
for the risk carried. It may occur when it is
realized that the risk valuation is
undervalued or there is an icrease of risk
after the valuation or the insurance
company still has some risks after the
expiration of the policy.
352 MATHEMATICAL PROVISION
FOR LIFE INSURANCE
• Companies operating in Life Insurance
uses this provision. It is calculated as;
• Actuary Mathematical Provisions = ( NPV
of Future Compensations – NPV of
Premiums to be paid)
353 PROVISION FOR OUTSTANDING LOSS
AND COMPENSATIONS
• Used for non-life insurance policies. May
be in 2 ways ;
• Accrued in the current period but the
insurance company didn’t pay any
compensation for various reasons.
• IBNR ( incurred but not reported) . The
stats of last 5 years is used by the
company for the calculation.
355 PROVISION ALLOCATED FOR POLICIES
BELONGING TO INVESTMENT RISK
LIFE INSURANCE POLICY HOLDERS
• Consists of the technical provisions which
are created to fulfill the obligations against
the policyholders, whose life insurance
policies values and returns are determined
by the risk they take.
ACCOUNTING OF LIFE
INSURANCE ACTIVITIES
I.
Premium Generation
Life insurance companies use two different methods in
accounting of premium generation:


Collection basis: In this method, the life insurance companies enter the
amounts that they collected into the income accounts. The Premium income
which is not collected is not taken into consideration and is not effected aa
an entry.
Accrual Basis: When the settlement day regarding life policy installment
comes, premium debt is entered as an income account even if it is not
collected on that day. The amounts will deducted from the debt of insuree as
long as the matured premium loans are paid.
Accounting of Premium Collections according to Collection Basis:
Example
•
An insuree which is client of a life insurance company bought a 12 monthlife insurance policy with 150 TL monthly payment on Februray 17. The
insuree paid two installments of the policy on the same day. Other
installments will be paid by credit card.
•
Collection of cash payment:
-----------------------------------------------02.17------------------------------------------------100.01. Cash
150
6. Income Statement Accounts
62. LIFE TECHNICAL INCOME
620. Written Premiums
620.01. Life Technical Income- Gross Written Premiums 150
---------------------------------------------------/-----------------------------------------------------
• Collection of installments (The entry is not
made if the insuree doesn’t effect any
payment):
----------------------------------------------/--------------------------------------------102.01.1. Bank-Demand-TL
300
620.01. Life Technical Income- Gross Written Premiums
300
----------------------------------------------/---------------------------------------------
• Similar entry will be made for other
installments.
Accounting of Premium Collections according to Accrual Basis
•
Using same data as in previous example:
-------------------------------------------------------02.17-----------------------------------------------------120.01.ssss.01. Receivab. from Insuıees-Insuree- Generation-Life Branch 1,800
620.01. Life Technical Income-Gross Written Premiums
1,800
-------------------------------------------------------03.17------------------------------------------------------102.01.1. Banks-Demand-TL
150
120.01.ssss.01. Receivab. from Insuıees-Insuree- Generation-Life Branch
150
----------------------------------------------------------/-----------------------------------------------------------
First entry: Accrue of the premium (150TL*12 months=1,800 TL)
Second entry: Premium collection.
•
Other future installments’ entry will be similar to the second entry.
II.
Cancellation of Premium
• An insurance policy is a legally binding contract between
an insurance company and the person who buys the
policy, commonly called the polcyholder who also is
often the person insured.
• In exchange for payment of a specified sum of money,
called the "premium," the insurance company agrees to
pay for certain types of loss or damage as specified by
the contract. When a loss occurs which meets all of the
requirements described by the terms of an insurance
policy, the loss is said to be "covered" by that policy.
• In case of cancellation of the premium, policy premium is
refunded to the insuree based on the days to mature.
• The policy of life insurance, which will be cancelled, is
included first in the category of policies which will be
cancelled. In the case that the premium debt is not paid
at its maturity, after six months from the date of maturity,
the actuarial mathematical allowances, that are
accumalated as of the date of cancellation, are not
refund and are included in the company income.
• When the life insurance policy is cancelled,it is
accounted as reversal entry of the premium generation
entry.
Accounting of the life insurance premium refund
Example
• Life Insurance Company decided to cancel the policy of one of its
insurees who didn’t complete the payment of the three-year
premium payment based on the legal process. Provision of actuarial
mathematics of the insuree is 2500 TL while the bonus provision is
13,000 TL as of the date of cancellation.
Accounting records concerning the example are given
below:
• Inclusion of Life Policy in the cancelled policies:
-----------------------------------------------/----------------------------------------------620.01. Life Technical Income-Gross Written Premiums 13,000
633.011. Life Mathematical Provision
2,500
620.01.01. Life Technical Income- Gross Written Premiums-Cancel
633.011.01. Life Mathematical Provision- Cancel
13,000
2,500
------------------------------------------------/----------------------------------------------
•
Cancellation entry of life policy that will be made after 6 month of maturity date.
-----------------------------------------------/----------------------------------------------620.01.01. Life Technical Income- Gross Written Premiums- Cancel 13,000
633.011.01. Life Mathematical Provision-Cancel
2,500
620.01.Life Technical Income- Gross Written Premiums-Cancel
13,000
625.01. Other Technical Income
2,500
----------------------------------------------------/----------------------------------------------------
Surrender
• Surrender is the cancellation of the policy
and the collection of amounts of
accumulations of life insuree who paid
premiums for at least three years.
Therefore, the surrender payments are
technical exspenses like compensation
payment.
Example
• Life Insurance Company, paid 50,000 TL
as surrender price on request one of its
insurees who paid premium for three
years.
--------------------------------/-----------------------630.01. Life Technical Expense-Gross Compensation Paid
102.01.1. Banks- Demand- TL
----------------------------------/-------------------------------
50,000
50,000
III.
Damage Accounting
According to the insurance contract which
signed between insured and insurance
company; insured under the policy
specified in the premium payment to enter
the payment obligation and the insurance
company the risk that happens,
commitment to pay insured person loss
and damage. Hence, damage is the
reason of the existence of such contract.
353- Provision for outstanding loss and compensations
Insurance and reinsurance companies have to make
provision for outstanding loss and compensations over
accrued and identified damage and compensation costs
or estimated values.
Outstanding loss can be;
• a. incurred and reported
• b. incurred but not reported
• c. reported but not incurred
Accounting of provision for outstanding loss and
compensations
Provisions for outstanding loss and compensations have
been accounted keep in mind the basis of each file and
the reinsurance distribution of relevant files.
As with other provisions transactions, accounting records
are performed by using expense accounts.
IV.
Insurance Provisions
Specific provisions in the insurance sector are as
follows:
a.
Provisions premium receivables:
Insurance companies have to make provisions
all irrecoverable premium receivables within two
months. Premium receivables provisions are
accepted as a non-deductible expense in terms
of tax law. So insurance companies have to add
these provisions in tax base.
These provisions were removed according to new
regulation. These provisions were not implemented in
life-insurance. Because when premium receivables are
not collected within two months, bills have been
cancelled.
b.
Insurance technical provisions
- Provisions for non-acquired premiums (350
account)
- Provisions for continuing risks (351 account)
c. Mathematical Provisions for life insurance (352
account)
d. Provisions for bonuses and discounts (354 account)
e. Provisions allocated for policies belonging to
investment risk life insurance policy holders (355
account)
f.
Other technical provisions (359 account)
All of provisions (except for mathematical provisions for
life insurance) have been implemented both life
insurance and other than life insurance.
352. Mathematical Provisions for life insurance
Mathematical Provisions for life insurance is difference
between taken premiums for undertaken risks by
insurance companies and their cash values obligations
of the beneficiaries. Mathematical provisions have been
made by insurance companies operating in the life
insurance. According to Insurance legislation,
mathematical provisions can be taken into account as an
expense in determination of earnings.
Actuarial mathematical provision is calculated by finding
the differences between cash value of the insurer's
future obligations and the present value of future
premiums to be paid by policy holders.
If actuarial mathematical provision is calculated as the
negative, this value is considered zero.
Life insurances have been implemented after tariffs
prepared by the insurance companies operating in the
life, approved by the Treasury.
According to the properties of tariffs, actuarial
mathematical provisions’ formulas are subject to change.
Actuarial mathematical provisions are calculated with the
main two methods are calculated.
a) Prospective method: have been found by subtracting
the present value of future premiums to be paid by policy
holders from cash value of the insurer's future
obligations.
b) Retropective method: provision is calculated in view of
the final value of the liabilities that fulfilled. This method
is backward calculation method.
Accounting of mathematical provisions
Because of mathematical provisions are long-term
commitments, these provisions are shown in tetrad
accounts. However, mathematical provisions which will
end within a year or expected to be paid, are shown in a
short-term liabilities account.
Example:
----------------------------31/12/2008----------------------------------------------------------(Income Statements Accounts)
Technical Expenses From Life Insurance
633.01.1. Mathematical Provisions for life insurance
633.01.1.1. Actuarial mathematical provisions
633.01.1.2. Share of profit provisions
(Balance Sheet Accounts)
(Insurance technical provisions )
452.01. Mathematical Provisions for life insurance
---------------------------------/-------------------------------------------------------------------
---------------------------------/------------------------------------------------------------------(Balance Sheet Accounts)
(Insurance technical provisions )
452.01. Mathematical Provisions for life insurance
(Income Statements Accounts)
Technical Expenses From Life Insurance
633.01.1. Mathematical Provisions for life insurance
633.01.1.1. Actuarial mathematical provisions
633.01.1.2. Share of profit provisions
------------------------------------------------------------------------------------------------------
ACCOUNTING
OF
NON-LIFE INSURANCE
ACTIVITIES
I.
Premium Production
&
Reinsurance Activities
Compulsory Traffic Insurance (Compulsary
Motorways Financial Liability Insurance)
Insurance fee;
•Premium
•Traffic Guarantee Insurance: 2% of net premium (The
relevant amount is paid into the fund account of Traffic
Services until the end of the following month)
•Traffic Services Development Fund: 5% of net
premium. It is paid to account of Ministry of Internal
Affairs at the latest 20th of following month when is
cashed in by insurance company.
•The total amount of insurance contract is paid for in
advance and in cash as soon as the contract is made,
in return the delivery of the policy
•BITT
The Accounts will be used
•
100 CASH / 102 BANKS
•
120 DUE FROM INSURANCE ACTIVITIES
–
120.03 Due from intermediaries
•
–
•
320.07 Debts to reinsurance companies
701.02.5 ACTIVITY EXPENSES
–
•
120.07 Due from reinsurance companies
320 DEBTS FROM INSURANCE ACTIVITIES
–
•
120.03.1 Due from agents
701.02.5.7 Reinsurance commissions (+)
715 COMPULSORY TRAFFIC (COMPULSORY MOTORWAYS FINANCIAL
LIABILITY)
–
715.01 Technical Revenue from Compulsory Traffic
•
•
–
715.01.1.1 Gross Recorded Premiums
715.01.1.2 Premiums transfrred to reinsurer (-)
715.02 Technical Expenses from Compulsory Traffic
•
715.02.5 Activity Expenses (-)
–
•
715.02.5.1 Production Commission Expenses (-)
360 TAXES AND FUNDS TO BE PAID
BITT
Guarantee Fund
Tr.Serv.Dev.Fund
Example
REM by insurance agents is arranged a traffic insurance policy on behalf of
Emre Korkmaz on 9th March 2007. The net premium of the policy is TL 60.
The agent commission: 10%
The reinsurance commission: 30%
The retention of B insurance company: 4%
ANSWER
Net Premium
60
Banking and Insurance Transactions Tax (%5)
Guarantee Fund (60x0,02)
Tr.Serv.Dev.Fund (60x0,05)
Gross Premium
3
1,2
3
67,2 insured’s liability
Commission ( 60x 0,10)
6
The amount will be transfferred to the insurance company by agent: 54
Amount taken in advance:
67,2
Commission
(6)
BITT
(3)
Guarantee
(1,2)
Tr.Serv.Dev.Fund
(3)
54
Reinsurance
• By which an insurance company can protect itself with other
insurance companies against the risk of losses. Insurance company
insure itself in reinsurer in order to allocate the risk taken in hand.
• Insurance Company hold a part of premium taken and transfer the
rest to reinsurer.
• Reinsurer pays commission to insurance company in consideration
of participation in the relevant expenses. The commission is
computed net premium which transferred to reinsurer.
Calculation of premium that will transfer to reinsurer:
Because of the retention of B Company is 4%
60 x 0,96= 57,6
Calculation of reinsurer commission:
57,6 x 0,30= 17,28
Journal Entry
9/3/2007
120 DUE FROM INSURANCE ACTIVITIES
67,2
120.03 Due from Intermediaries
120.03.1 Due from Agents / REM
715 COMPULSORY TRAFFIC ( COMPULSORY
MOTORWAYS FINANCIAL LIABILITY)
715.01 Technical Revenue from Compulsory Traffic
715.01.1 Recorded Premiums
360 TAXES AND FUNDS TO BE PAID
BITT
3
Guarantee Fund 1,2
Tr.Serv.De.F.
3
9/3/2007
715 COMPULSORY TRAFFIC ( COMPULSORY
6
MOTORWAYS FINANCIAL LIABILITY)
715.01 Technical Expenses from Compulsory Traffic
701.02.5.1 Produc. Com.Exp.(-)
120 DUE FROM INSURANCE ACTIVITIES
120.03 Due from Int.
120.03.1 Due from Agents / REM
60
7,2
6
12/3/2007
102 BANKS
54
120 DUE FROM INSURANCE ACTIVITIES
120.03 Due from Intermedaries
120.03.1 Due from Agents
360
15/4/2007
TAXES AND FUNDS TO BE PAID
3
BITT
120 DUE FROM INSUANCE ACTIVITIES
120.03 Due from Intermedaries
120.03.1 Due from Agents
54
3
20/4 /2007
360
TAXES AND FUNDS TO BE PAID
3
Tr.Ser.Dev.Fund
120 DUE FROM INSURANCE ACTIVITIES
120.03 Due from intermediaries
120.03.1 Due from Agents
31/4 /2007
360 TAXES AND FUNDS TO BE PAID
1,2
Guarantee Fund
120 DUE FROM INSURANCE ACTIVITIES
120.03 Due from Intermediaries
120.03.1 Due from Agents
3
1,2
715 COMPULSORY TRAFFIC ( COMPULSORY
MOTORWAYS FINANCIAL LIABILITY)
715.01 Technical Revenues from Compulsory Traffıc
715.01.1.2 Premiums transferred to reinsurer (-)
57,6
320 DEBTS FROM INSURANCE ACTIVITIES
320.07 Debts to reinsurer
120 DUE FROM INSURANCE ACTIVITIES
120.07 Due from reinsurer
715.02.5 OPERATING EXPENSES
715.02.5.7 Reinsurance Commissions
57,6
17,28
17,28
II.
Cancellation of Premium
• Avoidance of premium for non-life insurance:
the amount of pertaining to the rest insurance
period is deducted from the relevant technical
revenue account. That amount is paid back to
insured.
• Also, the amount of BITT to pertaining to the rest
period is paid back to insured.
• Insurance Company will deduct relevant tax
amount that is paid back from amount of BITT to
pertaining to month when avoidance is made in.
Example
• By demand of insured, Insurance agent
enounces to avoid a hull policy that is arranged
by itself with net premium amount of 750YTL.
The maturity of the policy is 180 days after date,
and all policy amount has been paid in cash.
• Agency commission
%10
• Reinsurance share
%80
• Reinsurance commission %30
Answer
•
•
•
•
Amount to be accounted as remand:
Net premium: 750 x 180 /365 = 369,86
Tax: 750 x0,05=37,50 x180/365= 18,49
Commission: 750 x0,10=75x180/365=
36,99
• Reinsurance shares to be remanded:
• Premium: 750x0,80= 600x180/365=295,89
• Commission: 600x0,30= 180x180/365=
88,77
Journal Entry
717 LAND MOTOR VEHICLES HULL INSURANCE
369,86
717.01 Technical Revenue from Hull
717.01.1.1 Gross Recorded Premiums
360 TAXES TO BE PAID
18,49
BITT
120 DUE FROM INSURANCE ACTIVITIES
120.03 Due from Intermediaries
120.03.1 Due from Agents
120 DUE FROM INSURANCE ACTIVITIES
120.03 Due from Intermediaries
120.03.1 Due from Agents
388,35
36,99
717 LAND MOTOR VEH. HULL INS.
717.01 Technical Expenses from Hull
717.02.5.1 Prod. Com.Exp.(-)
36,99
1/5/200
120 DUE FROM INSURANCE ACTIVITIES
120.07 Due from Reinsurers
295,89
717
LAND MOTOR VEHICLES
HULL INSURANCE
717.01 Technical Revenues from Land Motor
Vehıcles Hull
717.01.1.2
Premiums Transferred
to Reinsurer
717.02.5 OPERATING EXPENSES
717.02.5.7 Reinsurance Commissions
295,89
88,77
320 DEBTS FROM INSURANCE ACTIVITIES
320.07 Debts to Reinsurers
88,77
III.
Damages
• Insurance firms are in charge of paying for damages.
• Damages are booked as “Activity Expenses”.
• The expert determines the damage and its
compensation is paid by insurance firm.
• The expert may be;
- An employee of insurance firm or
- Self employed person (if it is a natural person, 20% of
expert’s fee is deducted.)
Damage Payment
• 717 LAND MOTOR VEHICLES HULL
INSURANCE
• 717.02 Land Motor Vehicles Hull
Insurance Technical Expense
• 717.02.1.1 Gross Damages Paid
• 717.02.1.2 Reinsurer Share of Damages
Paid (-)
Example
• Ayşe Yılmaz is a customer of West Insurance, had an accident and
her car had damaged.
• Insurance firm hired a self-employed expert and he determined the
damage as 2100 TL.
• Expert’s fee is 150 TL.
• The claim result is paid by EFT.
• Reinsurance rate is 80% on insurance policy.
Solution:
-----------------------------------------------------/--------------------------------------------------------717 LAND MOTOR VEHICLES HULL INSURANCE
2.250
717.02 Land Motor Vehicles Hull Insurance
Technical Expense
717.02.1.1 Gross Damages Paid
102 BANKS
2.100
100 CASH
120
360 TAXES AND FUNDS TO BE PAID
30
--------------------------------------------------/-----------------------------------------------------------120 DUE FROM INSURANCE ACTIVITIES
1.680
120.07 Due From Insurance Firms
701 FIRE INSURANCE
1.680
701.02 Technical Expenses From
Fire Insurance
701.02.1.2 Compensations Paid
(Net of the Reinsurer Share)
-------------------------------------------------/-------------------------------------------------------------
IV.
Provisions
Technical Provisions
1- PROVISIONS FOR NON-ACQUIRED PREMIUMS
2- PROVISIONS FOR CONTINUING RISKS
3- PROVISION FOR OUTSTANDING LOSS AND COMPENSATIONS
PROVISIONS FOR NON-ACQUIRED PREMIUMS
• 701.01 TECHNICAL REVENUE FROM FIRE INSURANCE
• 701.01.2.2.1 NON-ACQUIRED PREMIUMS PROVISION
(NET OF THE REINSURER SHARE ) (+)
• 701.01.2.2.2 VARIANCE IN CONTINUING RISKS
PROVISION (NET OF THE REINSURER SHARE AND
TRANSFERRED PORTION) (+/-)
• 350 PROVISIONS FOR NON-ACQUIRED PREMIUMS
• 350.02 PROVISIONS FOR NON-ACQUIRED PREMIUMS
REINSURER SHARE
EXAMPLE
• Trust Insurance Firm has fire policies which are calculated
5.000.000 TL for next term in 31.12.2008.
• 60% of it is passed to the reinsurers.
Solution:
------------------------------------------31.12.2008---------------------------------------------701.01 Technical Revenue From Fire Insurance
5.000.000
701.01.2.1.1 Non-Acquired Premiums Provision
350 NON-ACQUIRED PREMIUMS
5.000.000
PROVISION
350.01 Non-Acquired Premiums Provision
------------------------------------------31.12.2008---------------------------------------------350 NON-ACQUIRED PREMIUMS PROVISION
3.000.000
350.01 Non-Acquired Premiums Provision Reinsurer
Share (-)
701.01 Technical Revenue From
3.000.000
Fire Insurance
701.01.2.2.1 Non-Acquired Premiums
Provision Reinsurer Share (-)
------------------------------------------------/------------------------------------------------------
At the beginning of next year:
------------------------------------------31.12.2008---------------------------------------------701.01 Technical Revenue From Fire Insurance
3.000.000
701.01.2.2.2 Deferred Non-Acquired Premiums Provision
Reinsurer Share
350 NON-ACQUIRED PREMIUMS
3.000.000
PROVISION
350.01 Non-Acquired Premiums Provision
Reinsurer Share (-)
------------------------------------------31.12.2008---------------------------------------------350 NON-ACQUIRED PREMIUMS PROVISION
5.000.000
350.01 Non-Acquired Premiums Provision
701.01 Technical Revenue From
5.000.000
Fire Insurance
701.01.2.2.1 Deferred Non-Acquired Premiums
Provision
------------------------------------------------/------------------------------------------------------
PROVISIONS FOR OUTSTANDING LOSSES
•
•
•
•
•
•
•
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765 MACHINE BREAKAGE
765.02 TECHNICAL REVENUE OF MACHINE BREAKAGE
765.02.2.1.1 PROVISIONS FOR OUTSTANDING LOSSES (+)
765.02.2.1.2 DEFERRED PROVISIONS FOR OUTSTANDING
LOSSES
765.02.2.2.1 PROVISIONS FOR OUTSTANDING LOSSES
REINSURER SHARE
765.02.2.2.2 DEFERRED PROVISIONS FOR OUTSTANDING
LOSSES REINSURER SHARE
353.01 PROVISION FOR OUTSTANDING LOSS AND
COMPENSATIONS
353.02 PROVISION FOR OUTSTANDING LOSS AND
COMPENSATIONS REINSURER SHARE
EXAMPLE:
• Trust Insurance Firm’s outstanding loss is 750.000 TL for 31.12.2008.
• Reinsurer share is 70%
Solution:
----------------------------------------31.12.2008---------------------------------------------765.02 Technical Revenue of Machine Breakage
750.000
765.02.2.1.1 Provisions for Machine Breakage
353 PROVISIONS FOR OUTSTANDING
750.000
LOSSES
353.01Provisions For Outstanding Losses
--------------------------------------31.12.2008-----------------------------------------------353 PROVISIONS FOR OUTSTANDING LOSSES
525.000
353.02 Provisions For Outstanding Losses
Reinsurer Share
765.02 Technical Revenue of Machine Breakage 525.000
765.02.2.2.1 Provisions for Machine Breakage
Reinsurer Share
At the beginning of next year:
----------------------------------------01.01.2009--------------------------------------------353 PROVISIONS FOR OUTSTANDING LOSSES
750.000
353.02 Provisions For Outstanding Losses
765.02 Technical Revenue of Machine Breakage
750.000
765.02.2.1.1 Deferred Provisions for Machine Breakage
--------------------------------------01.01.2009----------------------------------------------765.02 Technical Revenue of Machine Breakage
525.000
765.02.2.2.1 Provisions for Machine Breakage
Reinsurer Share
353 PROVISIONS FOR OUTSTANDING
525.000
LOSSES
353.01Provisions For Outstanding Losses
Reinsurer Share
--------------------------------------------/-------------------------------------------------------
Financial Statements in Insurance Companies
Asset Items of Balance Sheet
BALANCE SHEET
Current PeriodPrevious Period
Structure of Balance Sheet
ASSETS
I. Current Assets
A. Cash and Cash Equivalents
B. Financial Assets and Financial Investments The Risk of Which Belongs to the Insured
C. Due From Principal Activities
D. Due From Related Parties
E. Other Receivables
F. Expenses and Revenue Accruals for Future Months
G. Other Current Assets
II. Non-Current Assets
A. Due From Principal Activities
B. Due From Related Parties
C. Other Receivables
D. Financial Assets
E. Tangible Assets
F. Intangible Assets
G. Expenses and Revenue Accruals for Future Months
H. Other Non-Current Assets
FootNote (31/12/XXX2) (31/12/XXX1)
Financial Statements in Insurance Companies
Basic Items related to liability and equity
I. Short Term Obligations
A. Financial Debts
B. Debts From Principal Activities
C. Due to Related Parties
Structure of Balance Sheet
D. Other Debts
E. Insurance Tachnical Provisions
F. Taxes and Other Sim ilar Obligatons To Be Paid and Provisions Allocated For Them
G. Provisions Related to Other Risks
H. Revenues and Expense Accruals For Future Months
I. Other Short Term Obligations
II. Long Term Obligations
A. Financial Debts
B. Debts From Principal Activities
C. Due to Related Parties
D. Other Debts
E. Insurance Tachnical Provisions
F. Other Obligatons and Provisions Allocated For Them
G. Provisions Related to Other Risks
H. Revenues and Expense Accruals For Future Years
I. Other Long Term Obligations
III. Equity Capital
A. Paid in Capital
B. Capital Reserves
C. Profit Reserves
D. Profits of Previous Years
E: Losses of Previous Years (-)
F. Term Net Profit
Financial Statements of in Insurance Companies
INCOME STATEMENT
BASIC ITEMS OF INCOME STATEMENT
Current PeriodPrevious Period
Note
I.
TECHNICAL DIVISION
A. Non-Life Technical Income
B. Non-Life Technical Expense (-)
C. Non-Life Technical Profit (A-B)
D. Life Technical Income
E. Life Technical Expense (-)
F. Life Technical Profit (D-E)
G. Individual Retirement Technical Income
H. Individual Retirement Technical Expense (-)
I. Individual Retirement Technical Profit (G-H)
J. Total Technical Profit (C+F+I)
II. NON TECHNICAL DIVISION
K. Investment Income
L. Investment Expenses (-)
M. Other Income and Expenses (+/-)
N. Net Profit / (Loss)
(31/12/XXX2)
(31/12/XXX1)