RBS 2005 Annual Report Download - page 191

section
03
Financial
statements
189
Notes on the accounts
Annual Report and Accounts 2005
Reserving risk
Reserving risk relates to both premiums and claims. It is the risk that reserves are assessed incorrectly such that insufficient funds
have been retained to pay or handle claims as the amounts fall due. Claims development data provides information on the historical
pattern of reserving risk.
Accident year
2001 2002 2003 2004 2005 Total
Insurance claims – gross £m £m £m £m £m £m
Estimate of ultimate claims costs:
At end of accident year 2,395 3,013 3,658 3,705 4,247 17,018
One year later (70) 91 (140) (186) — (305)
Two years later 20 1 (106) — — (85)
Three years later 12 (12) — — — —
Four years later (40) ————(40)
Current estimate of cumulative claims 2,317 3,093 3,412 3,519 4,247 16,588
Cumulative payments to date (2,119) (2,680) (2,637) (2,521) (2,035) (11,992)
Liability recognised on the balance sheet 198 413 775 998 2,212 4,596
Liability in respect of prior years 208
Claims handling costs 109
Total liability included on the balance sheet 4,913
Accident year
2001 2002 2003 2004 2005 Total
Insurance claims – net of reinsurance £m £m £m £m £m £m
Estimate of ultimate claims costs:
At end of accident year 2,011 2,584 3,215 3,508 4,150 15,468
One year later (61) 59 (106) (168) — (276)
Two years later 22 (12) (103) — — (93)
Three years later 13 (3) — — — 10
Four years later (41) ————(41)
Current estimate of cumulative claims 1,944 2,628 3,006 3,340 4,150 15,068
Cumulative payments to date (1,779) (2,254) (2,342) (2,367) (2,008) (10,750)
Liability recognised on the balance sheet 165 374 664 973 2,142 4,318
Liability in respect of prior years 138
Claims handling costs 109
Total liability included on the balance sheet 4,565