Some Cross-Cutting Issues 329
pre mium of 30, intended to provide coverage for the
fi rst three months of the next reporting period.
A4.76 Net premiums are defi ned as actual premi-
ums plus premium supplements minus the insurance
service charge payable by the policyholders. Premi-
ums are usually payable regularly, oft en at the start
of an insurance period, whereas claims fall due later,
in the case of life insurance, oft en many years later.
Th e amounts accumulating between the periods the
premi ums were payable and when a claim becomes
payable create a liability (reserves) for the insurer.
Th ese amounts are at the disposal of the insurer to
invest in assets and earn income from it. Th e income
allows the insurance corporation to charge lower pre-
miums than would be the case otherwise. Th e prop-
erty income earned in this way is attributed to the
policyholders and is subsequently recorded as pre-
mium supple ments from the policyhold ers.
A4.77 A claim (benefi t or call) is the amount pay-
able to the policyholder by the insurer in respect of an
event covered by the policy occurring in the period
for which the policy is valid. Claims generally become
due when the event occurs, even if the payment is
made some time later. An exception is made in cases
where making a claim is possible only long aft er the
event has happened.^21 In such a case, the claim is re-
corded at the time the insurance company accepts
the liability. Claims that become due are described
as claims incurred. In some contested cases, the time
between the occurrence of the event giving rise to the
claim and the settlement of the claim may be several
years. Claims on an accrual basis are recognized as
due when an event takes place that gives rise to a valid
claim, regardless of whether paid, settled, or reported
during that period.
Statistical Treatment of Nonlife Insurance and Standardized Guarantees
A4.78 Under a nonlife insurance policy (or stand-
ardized guarantee), the insurer (or guarantor) accepts
a premium (or fee) from a client and holds it in reserve
(liability) until a claim (or call) is made or the period
of the insurance expires. In the meantime, the insurer
(guarantor) invests the amounts available due to pre-
(^21) For example, an important series of claims were recognized
only when exposure to asbestos was established as a cause of
serious illness and was judged to give rise to claims under an
insurance policy valid at the time of the exposure.
payments of premiums, reserves held against out-
standing claims, and actuarial reserves held against
outstanding risks. Th ese assets generate investment in-
come. Th e property income represents income forgone
by the client, and so is treated as property expense at-
tributed to the policyholders. It is therefore rerouted
and subsequently recorded as an implicit sup plement
to the actual premiums. Th e insurer (guaran tor) sets
the level of the actual premiums (fees) to be such that
the sum of the actual premiums plus the property in-
come earned on assets, minus the expected outstand-
ing claims will leave a margin that the insurer can
retain. As an insurer or guarantor, the general gov-
ernment or public sector unit incurs liabilities equal to
the present value of the expected claims or calls on out-
standing guarantees, net of any recoveries.^22 Th e statis-
tical treatment of nonlife insurance and standard ized
guarantee schemes in GFS will depend on whe ther the
general government or public sector unit acts as the
insurer (guarantor), or whether they are policyholders.
Flows and stock positions recorded by public sector units as nonlife insurers or guarantors
A4.79 General government units are not likely to
operate an insurance scheme, but if they do and if
they maintain separate reserves, they would record
trans actions related to the nonlife insurance in the
same way as other insurers. On the other hand, gen-
eral government units are oft en involved as the guar-
antor in standardized guarantee schemes. For general
gov ernment or pub lic sector institutional units acting
as an insurer or guarantor of standardized guarantees,
re cording these events would require recording the
fol lowing entries in GFS:- Actual premiums (fees) receivable—Th e amount
of actual premiums (fees) receivable represents
premiums earned and prepayment of premi-
ums.^23 Th e portion of actual premiums (fees)
receivable representing premiums (fees) earned
for the report ing period represents revenue, clas-
sifi ed as premi ums (14511) or fees for standard-
ized guarantees (14512), respectively. Prepaid
(^22) Th ese recoveries could include recoveries from the insured,
reinsurance, defaulting borrowers, or third parties.
(^23) An implicit service charge is implied by nonlife premiums.
However, these charges can be calculated only in the context of
an analysis of the whole of the economy. Th erefore, the implicit
service charge is not recognized in GFS.