Appendix 2 - Expense Ratio Definition
| No: 201712000145 | Date(g): 21/12/2017 | Date(h): 3/4/1439 |
| For the Expense Ratio, the Numerator is: | ||||
| Commission Incurred (*) (Form 21, Line 38, Column E) Minus Reinsurance Commissions Earned (Form 21, Line 18, Column E) Minus Other Underwriting Income (Form 21, Line 19, Column E) Plus Policy Acquisition Costs (Form 21, Line 39, Column E) Plus Other direct underwriting Expenses (Form 21, Line 40, Column E) Plus Doubtful Debt Expense (Form 21, Line 41, Column E) Plus Operational and Technical Expenses (Form 21, Line 51, Column E) Plus Shareholders Expenses (Form 22, Line 39, Column A) Plus Zakat (Form 22, Line 51, Column A) Plus Taxes (Form 22, Line 52, Column A) | ||||
| * The item “commission incurred (Form 21, Line 38, Column E)” should be replaced with the ‘expected’ commission at the portfolio level for the business to be underwritten. | ||||
| The Denominator is the Net Earned Premium plus any ‘Other Income’ other than that arising from investments and underwriting activities: | ||||
| Net Earned Premium (Form 21, Line 17, Column E) + Other Income (Form 21, Line 71, Column E) + Other Income - Shareholders (Form 22, Line 19, Column A) | ||||
| If a Company has incorrectly treated movements in Premium Deficiency Reserves as part of its earned premium for accounting purposes, then it should reverse these movements out for the purposes of calculating the Denominator above. |