III IC-46 cheat sheet

Accounting equation: Assets = Liabilities + Capital. Every premium, claim, and expense entry must keep it balanced.

Premium income is recognised when the policy period starts (earned) or when written (booked); unearned premium reserve = written premium × unexpired fraction of the term.

Claims incurred = claims paid during the period + outstanding claims reserve at close − outstanding claims reserve at opening.

Loss ratio = claims incurred ÷ earned premium × 100%; expense ratio = underwriting expenses ÷ written premium × 100%; combined ratio = loss ratio + expense ratio.

Underwriting result = earned premium − claims incurred − expenses incurred; add investment income to reach operating result.

Unexpired risk reserve is raised when expected claims and expenses on unexpired policies exceed the unearned premium reserve held.

Reinsurance entries: ceded premium reduces written premium; reinsurance recoveries reduce claims incurred; balances due to/from reinsurers sit in receivables or payables.

Solvency margin test compares available capital (share capital + reserves − inadmissible assets) with required margin, typically a percentage of net written premium or net claims.

Trial balance must balance before final accounts; accruals and prepayments adjust expense and income lines at period end.

Insurers may invest only in admissible asset classes defined by the regulator; inadmissible assets are excluded from solvency calculations.

Prudent person rule: investments must be selected with care, skill and diligence expected of a prudent manager, and diversified to limit concentration.

Concentration limits cap exposure to a single counterparty, single issuer, or single asset class as a percentage of total admitted assets.

Matching principle: assets backing technical provisions should match the currency, duration, and liquidity of the corresponding liabilities.

Related-party and connected-party investments are restricted and must be disclosed; loans to directors or affiliates are typically prohibited or capped.

Valuation rules: listed securities at market value, unlisted equity at approved valuation methods, and property at periodic independent appraisal.

Derivatives are permitted only for hedging or efficient portfolio management, not for speculation, and must be covered by adequate controls.

Investment records must be kept and reported to the regulator periodically; breaches of limits require notification and remediation within set deadlines.