A10 Reinsurance assets

A10 – Reinsurance assets

This note details the reinsurance recoverables on our insurance and investment contract liabilities.

(a) Carrying amounts

The reinsurance assets at 31 December comprised:

	2009 £m	2008 £m	2007 £m
Long-term business
Insurance contracts	4,299	4,466	4,298
Participating investment contracts	—	52	22
Non-participating investment contracts	1,258	1,047	1,461
Outstanding claims provisions	40	145	94
	5,597	5,710	5,875
General insurance and health
Outstanding claims provisions	1,194	1,737	1,634
Provisions for claims incurred but not reported	449	29	29
	1,643	1,766	1,663
Provision for unearned premiums	332	418	511
Other technical provisions	—	—	5
	1,975	2,184	2,179
Total	7,572	7,894	8,054

Of the above total, £4,493 million (2008: £6,097 million, 2007: £4,796 million) is expected to be recovered more than one year after the statement of financial position date.

The increase in the reinsurers' share of provisions for claims incurred but not reported during 2009 is due to a revised allocation between outstanding claims and IBNR of reinsurance assets in respect of certain discontinued run-off business

(b) Assumptions

The assumptions, including discount rates, used for reinsurance contracts follow those used for insurance contracts.

Reinsurance assets are valued net of an allowance for their recoverability.

(c) Movements

The following movements have occurred in the reinsurance asset during the year:

(i) In respect of long-term business provisions

	2009 £m	2008 £m
Carrying amount at 1 January	5,565	5,781
Asset in respect of new business	412	235
Expected change in existing business asset	(57)	243
Variance between actual and expected experience	(35)	(1,141)
Impact of other operating assumption changes	(189)	(761)
Impact of economic assumption changes	(250)	306
Other movements	486	(231)
Change in asset	367	(1,349)
Effect of portfolio transfers, acquisitions and disposals	(41)	140
Foreign exchange rate movements	(334)	993
Carrying amount at 31 December	5,557	5,565

The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of reinsurance assets. The reduction in the reinsurance asset from assumption changes mainly relates to Ireland, with a corresponding reduction made to gross insurance contract liabilities. For participating businesses, a movement in reinsurance assets is generally offset by a corresponding adjustment to the unallocated divisible surplus and does not impact on profit. Where assumption changes do impact profit, these are included in the effect of changes in assumptions and estimates during the year shown in note A11, together with the impact of movements in related liabilities and other non-financial assets.

(ii) In respect of general insurance and health outstanding claims provisions and IBNR

	2009 £m	2008 £m
Carrying amount at 1 January	1,766	1,663
Impact of changes in assumptions	(72)	21
Exceptional strengthening of latent claims provisions	—	52
Reinsurers’ share of claim losses and expenses
Incurred in current year	255	228
Incurred in prior years	7	12
Reinsurers’ share of incurred claim losses and expenses	262	240
Less:
Reinsurance recoveries received on claims
Incurred in current year	(138)	(107)
Incurred in prior years	(202)	(257)
Reinsurance recoveries received in the year	(340)	(364)
Unwind of discounting	22	24
Change in reinsurance asset recognised as income	(128)	(27)
Effect of portfolio transfers, acquisitions and disposals	57	27
Foreign exchange rate movements	(50)	105
Other movements	(2)	(2)
Carrying amount at 31 December	1,643	1,766

(iii) Reinsurers’ share of the provision for unearned premiums (UPR)

	2009 £m	2008 £m
Carrying amount at 1 January	418	511
Premiums ceded to reinsurers in the year	775	798
Less: Reinsurers’ share of premiums earned during the year	(861)	(909)
Changes in reinsurance asset recognised as income	(86)	(111)
Reinsurers’ share of portfolio transfers and acquisitions	5	8
Foreign exchange rate movements	(5)	10
Carrying amount at 31 December	332	418