Section EY 24 — Income Tax Act 2007: Outstanding claims reserving amount: non-participation policies not annuities

EY 24 Outstanding claims reserving amount: non-participation policies not annuities Calculation of reserving amount (1) For an income year (the current year ), a life insurer has an outstanding claims reserving amount for a class of policies calculated using the formula— opening outstanding claims reserve − closing outstanding claims reserve. Definition of items in formula (2) In the formula in subsection (1),— (a) opening outstanding claims reserve is— (i) the amount of the life insurer’s closing outstanding claims reserve for the class of policies, for the income year before the current year (the prior year ); or (ii) if the life insurer has no closing outstanding claims reserve for the prior year, the amount that would be the outstanding claims reserve for the class of policies, using subsections (3) and (4) with necessary modifications, calculated at the end of the prior year, but using a basis consistent with the one that the insurer used for tax purposes in that prior year (for example, if IBNR liability was not accounted for, for tax purposes, in the prior year, the opening balance calculation does not take into account IBNR liability): (b) closing outstanding claims reserve is the amount of the life insurer’s outstanding claims reserve calculated under subsections (3) and (4) for the class of policies at the end of the current year. Outstanding claims reserve calculation (3) A life insurer’s outstanding claims reserve is calculated for the relevant policies using the formula— life risk claims incurred + life risk claims reported + risk margin. Definition of items in formula (4) In the formula in subsection (3),— (a) life risk claims incurred is the actuarially determined estimate of present values (gross) for the life risk components of claims not yet reported to the life insurer before the end of the current year, but the insured-against event has occurred. The life risk components must take into account the probability of the claims being paid, and future expenses for administering the claims, but the present value (gross) of relevant life reinsurance claims must be subtracted from the total: (b) life risk claims reported is the present values (gross) of the life risk components of claims reported but not yet paid. The life risk components must take into account the probability of the claims being paid, and future expenses for administering the claims, but the present values (gross) of relevant life reinsurance claims must be subtracted from the total: (c) risk margin is the appropriate margin for the life risk components of claims described in paragraph (a) or (b), to the extent to which the margin is actuarially determined, reflects the uncertainty of the estimates that arise from the use of the relevant best estimate assumptions, and is not already included in the life risk components of the claims. Defined in this Act: amount , best estimate assumptions , claim , class of policies , income year , life insurer , life reinsurance , life risk , life risk component , mortality profit present value (gross) Section EY 24: substituted, on 1 July 2010, by section 190(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EY 24(2)(a)(ii): amended (with effect on 1 July 2010), on 21 December 2010, by section 58(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130). Section EY 24(2)(a)(ii): amended (with effect on 1 July 2010), on 7 September 2010, by section 46(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).