Chapter 13 Glossary

Question 1

Break-up basis

Answer 1

A valuation basis that assumes that the writing of new business ceases and cover on current policies is terminated. Current policyholders would normally be entitled to a proportionate return of the original gross premium and deferred acquisition costs would probably have to be written off. Also known as a wind-up basis.

Question 2

Going-concern basis

Answer 2

The accounting basis normally required for an insurer’s published accounts, based on the assumption that the insurer will continue to trade as normal for the long term future.

Question 3

Run-off basis

Answer 3

A valuation basis that assumes an insurer will cease to write new business, and continue in operation purely to pay claims for previously written policies. Typically expenses and reinsurance arrangements change after an insurer ceases to write new business.

Question 4

Wind-up basis

Answer 4

same as break-up basis