Method statement

Step 1.   Use the * applicable insurance contracts accounting standard to measure, at the end of the income year, the company's * liability for remaining coverage under * general insurance policies, but when doing so disregard that standard's treatment of loss components and loss - recovery components of onerous contracts (within the meaning of that standard).

Step 2.   Using that standard, reduce the result from step 1 by any * asset for insurance acquisition cash flows.

Step 3.   Using that standard, reduce the result from step 2 by any premiums paid or payable by the company, in that or an earlier income year, for the reinsurance of risks covered by those * general insurance policies in respect of later income years, except:

  (a)   reinsurance premiums that the company cannot deduct because of subsection   148(1) of the Income Tax Assessment Act 1936 (about reinsurance with non - residents); and

  (b)   reinsurance premiums that were paid or payable in respect of a particular class of * insurance business if, under the reinsurance contract (within the meaning of that standard), the reinsurer agreed to pay, in respect of a loss incurred by the company that is covered by the relevant policy, some or all of the excess over an agreed amount.

Step 4.   Using that standard, add to the result from step 3 any reinsurance commissions received or receivable by the company that relate to reinsurance premiums counted under step 3.