CLAIMS PROVISION AT DIVISIONAL OFFICES

The outstanding liability at the year-end is determined at the divisions/branches where the liability originates for outstanding claims. Thereafter, based on the total consolidated figure for all the divisions/branches, the Head Office considers a further provision in respect of outstanding claims. Every division prepares a claims statement in the format given on the next page. To cover the possibility of errors in judgement in estimation or in cases of under-estimation of liability (where full details are not available) as also for the possibility of liability not being considered for claims incurred but not reported due to the nature of risks being such (e.g., where communication is made after a considerable time lag or after the cut-off date for preparation of final accounts) the company at its head office makes an additional provision over and above that made by Divisions/Branches on the Divisional Auditors’ Reports. Such liability is presently being cushioned to the extent of 5.5% in respect of Fire, Marine and Miscellaneous business (excluding motor, engineering, aviation, hull and credit guarantee) and 10.5% for motor and engineering business. In view of the above, total of outstanding claims comprises the estimated liability recorded at the Divisions/Branches and the further provision made on this account at head office. This provision is subject to the amount to be adjusted for re-insurances, which are dealt with at head office.