RBS 2008 Annual Report Download - page 232

231RBS Group Annual Report and Accounts 2008
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 2006 2007 2008 Total
Insurance claims – gross £m £m £m £m £m £m £m £m £m
Estimate of ultimate claims costs:
At end of accident year 2,395 3,013 3,658 3,710 4,265 4,269 4,621 4,080 30,011
One year later (70) 91 (140) (186) (92) (275) (71) — (743)
Two years later 20 1 (106) (88) (147) (77) ——(397)
Three years later 12 (12) (55) (85) (60) ———(200)
Four years later (40) (17) (47) (31) ————(135)
Five years later (1) (19) (21) —————(41)
Six years later (9) (11) ——————(20)
Seven years later 6——————— 6
Current estimate of cumulative claims 2,313 3,046 3,289 3,320 3,966 3,917 4,550 4,080 28,481
Cumulative payments to date (2,235) (2,932) (3,060) (2,977) (3,442) (3,121) (3,393) (2,052) (23,212)
78 114 229 343 524 796 1,157 2,028 5,269
Liability in respect of prior years 91
Claims handling costs 118
Gross general insurance claims liability 5,478
Accident year
2001 2002 2003 2004 2005 2006 2007 2008 Total
Insurance claims – net of reinsurance £m £m £m £m £m £m £m £m £m
Estimate of ultimate claims costs:
At end of accident year 2,011 2,584 3,215 3,514 4,168 4,215 4,572 4,034 28,313
One year later (61) 59 (106) (168) (67) (261) (90) — (694)
Two years later 22 (12) (103) (90) (161) (87) ——(431)
Three years later 13 (3) (53) (81) (64) ———(188)
Four years later (41) (21) (44) (46) ————(152)
Five years later 1 (24) (23) —————(46)
Six years later (19) (5) ——————(24)
Seven years later —————————
Current estimate of cumulative claims 1,926 2,578 2,886 3,129 3,876 3,867 4,482 4,034 26,778
Cumulative payments to date (1,873) (2,492) (2,714) (2,835) (3,364) (3,085) (3,347) (2,032) (21,742)
53 86 172 294 512 782 1,135 2,002 5,036
Liability in respect of prior years 42
Claims handling costs 113
Net general insurance claims liability 5,191
Claims reserves
It is the Group’s policy to hold undiscounted claims reserves (including
reserves to cover claims which have been incurred but not reported
(IBNR reserves)) for all classes at a sufficient level to meet all liabilities
as they fall due.
The Group’s focus is on high volume and relatively straightforward
products, for example home and motor. This facilitates the generation of
comprehensive underwriting and claims data, which are used to
accurately price and monitor the risks accepted.