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172 Nagy, C.M. ; Cotleţ, D. promise of payment of compensation, the company establishes a premium reserve if it has to repay part of the premiums. 2. DEFINITION OF TECHNICAL RESERVES General insurance companies must constitute technical reserves relating to past and future liabilities arising from insurance contracts written in the reference year. Insurance companies which are engaged in the life insurance business are required by law 1 to establish and maintain technical reserves, referred to as mathematical reserves for the life insurance fund. Technical reserves must have at any time an amount sufficient to enable the company to move forward, to the extent of what is reasonably foreseeable, the commitments arising from insurance contracts 2 . “Specific for insurance companies is the establishment of technical reserves, namely: the premium reserve, life insurance technical reserves (mathematical reserve, reserve for bonuses and rebates on life insurance, other technical reserves), reserve for insurance damage done separately for general and life insurances, the reserve for bonuses and rebates on general insurance, the equalization reserve and other reserves relating to general insurance.” (Cistelecan Rodica, et al., 2006) “Technical reserves are estimates of future payments for risks produced in the past (for general insurance) or for those that will occur in the future (for life insurance) and the value of technical reserves should allow the insurer, at any time, to honor its commitments arising from the insurance contracts.” (Nagy Cristina Mihaela, Trif Viorel, 2010, pp 604) According to law 32/2000 3 insurance companies engaged in the general insurance business are required to establish and maintain the following technical reserves: the premium reserve, loss reserve, unreported loss reserves, catastrophe reserves, the reserve for unexpired risks, the equalization reserve. Reserves are established during the conduct of business at a level at least equal to the total compensation of the previous financial year. The value of technical reserves should allow the insurer, at any time, to honor its commitments arising from insurance contracts. 3. SPECIFIC ASPECTS OF THE TECHNICAL RESERVES ACCOUNTING The formation of these reserves is different from the constitution of reserves from commercial companies, being made based on costs, having a role in predicting the future insurance claims. 1 Law 32/2000 updated in January 2011, art. 21, paragraph (3) 2 Rule no.5/2001 on calculation and record of minimum technical reserves for general insurance, issued by the Insurance Supervisory Commission, reprinted. 3 Law 32/2000 updated in January 2011, art. 21, paragraph (1)
Specific Aspects of the Technical Reserves of Insurance Accounting 173 This form shows up just from the random nature of the insurance contract where the collection of the insurance premiums will not generate automatically an obligation to pay a compensation or indemnity to each insured, the insurance company's obligations occur randomly for certain unidentifiable contracts during the agreement. Technical reserves are shown separately in accounting, according to each type of reserve formed according to the given destination, having created positions in the chart of accounts. The general principle of these reserves it that they are formed since the insurance contract is made and maintained throughout the period of validity, therefore, reserves related to contracts of life insurance are higher than those related to general insurance contracts as life insurance are concluded for much larger periods. Accounting ensures records of technical reserves formed by insurance companies under the law and it uses accounts from class 3 Technical Reserves Accounts which include the following groups of accounts: - 31 “Technical reserves of life insurance and general insurance premium reserve” - 32 “Reserves for claims on life insurance and general insurance” - 33 “Technical reserves for general insurance” - 39 “Technical reserves related to contracts ceded in reinsurance”. “The amounts transferred to technical reserves are obligations of the insurer and are deducted from its income in calculating profits. The technical reserves established and maintained in the currency are registered in accounting in lei, at the rate in force at the time of operations. Technical reserves are inventoried and assessed at the end of each period. The methods of assessing technical reserves adopted by the company (temporis prorate, statistical, etc.) must be the same throughout the year and from year to year.” (Negru Titel, 2007, pp 116) “In case of cancellation or termination of an insurance contract, the insurer will perform the accounting transactions required to issue such contracts related to technical reserves.” (Bunica-Petrescu Elena, 2003) The company estimates a rate of claims to be paid corresponding to its portfolio of insurance and subsequently creates reserves for claims and pays compensation to policyholders from these reserves which are reduced by the amount paid. The main liabilities of insurance companies are subject to premium and loss reserve. Premium reserves (Bogdan Decebal Manole, 2005) are reserve funds created for each form of insurance, in order to supply the insurance fund with the difference between the net written premiums and net paid premiums. The premium reserves are highlighted using the accounts 315 "Premium reserve on general insurance" and 615 "Expenditure on the premium reserve". The accounting operations on the creation and use of premium reserves for direct general premiums are: a) forming the premium reserve:
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Annals of the University of Petroş
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Concerns on Labour Power Selection
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Regional Development - Past, Presen
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4. CONCLUSIONS Forms of Tax Evasion
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Mitigation of the Crisis Effects in
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Guiding Marks Regarding the Reasoni
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The Influence of the Mining Unions
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Integration process in management s
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ERP and BI Implementation in Romani
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Romanian Companies Dilemmas-Busines
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The Utility of the Barter Agreement
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Sovereign Risk Assessment under Eco
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The Evolution of Marketing Methods
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