Insurance Accounting

structions – PLEASE READ THEM CAREFULLY

The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.

Assignments submitted through email will not be accepted.

Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

Students must mention question number clearly in their answer.

Late submission will NOT be accepted.

Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted.

Assignment Question(s): (15 Marks)

Q1. Reinsurance is a form of insurance purchased by insurance companies in order to mitigate risk. Essentially, reinsurance can limit the amount of loss an insurer can potentially suffer. In other words, it protects insurance companies from financial ruin, thereby protecting the companies’ customers from uncovered losses. (5 Mark)

Questions:

a. How do reinsurance companies work?

b. What are the Reinsurance Contracts?

c. Give example of reinsurances companies in KSA and describe their main services

Q2. What is the concept of “Fair Value? Outline the basic difference between fair value and book value of an asset. Explain the key features of fair value defined by FASB ASC. (5 Marks)

Q3. XYZ Company has the following financial data: (5 marks)

Particulars

Amounts (SAR)

Total Profit for the Year

3

77,500

General Takaful Assets (Year 2014)

1,390,000

General Takaful Assets (Year 2015)

1,517,500

Cash

11,500

Short-term Investment

23,500

Short term liabilities

85,000

Underwriting Surplus Distributable to Participants/Participants’ Share of Profit

145,500

Gross Contribution

9

58,000

Net Contribution

662,500

Wakalah Fee

77,500

Commission Paid

28,300

Management Expense

58,000

Net Claim Incurred

287,500

Earned Contribution

632,500

You are required to calculate:

Return on Assets

Quick Liquidity

Surplus Distribution Ratio

Expense Ratio

Claims Ratio