GIM6050 - Technical provisions: background: Unexpired Risks Provision: discounting
The 2005 ABI SORP (GIM2050) permits taking account of the investment income on assets representing technical funds in the calculation of a provision for unexpired risks. Paragraph 122 of the SORP says that
바카라 사이트˜In calculating the expected value of future claims in relation to the unexpired periods of risk on policies in force at the balance sheet date, the future investment return arising on investments supporting the unearned premiums and unexpired risks provisions may be taken into account바카라 사이트¦ The investment return will be that expected to be earned by the investments held until the future claims are settled.바카라 사이트™
Similarly paragraphs 19 and 20 of Appendix 9.2 in Volume II of the Financial Services Authority바카라 사이트™s sourcebook IPRU(INS) provide that where the URP has been determined after taking into account the expected investment return a note on the 바카라 사이트™discounting바카라 사이트™ adjustment is required. It appears to be common practice for companies to take advantage of this option, so that unexpired risks reserves are frequently calculated on something equivalent to a discounted basis.