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Notes to the Financial Statements (continued)

Note 24:  Insurance Liabilities
Forecast   Actual
Original
Budget
$m 		Estimated
Actuals
$m 		  30 June 2008
$m		 30 June 2007
$m
By entity  
18,949 20,663 ACC liability 20,374 17,328
42 79 EQC - property damage claims 97 68
20 10 Other insurance liabilities 13 22
19,011 20,752 Total insurance liabilities 20,484 17,418
By type  
Outstanding claims liability 18,039 15,438
Unearned premium liability 1,828 1,661
Unearned premium liability deficiency 617 319
Other -  - 
Total insurance liabilities 20,484 17,418
By maturity  
3,899 4,757 Expected to be settled within one year 4,615 3,804
15,112 15,995 Expected to be outstanding for more than one year 15,869 13,614
19,011 20,752 Total insurance liabilities 20,484 17,418
Assets arising from insurance obligations are:  
Receivables for premiums 2,822 2,352

Insurance obligations arise primarily from the accident compensation scheme provision of personal injury cover for all New Zealand citizens, residents and temporary visitors to New Zealand and the earthquake commission provision of natural disaster insurance to residential property owners.

The objectives, policies and procedures for managing these risks are set out in the governing statutes and policy documents of the Accident Compensation Corporation (ACC) and the Earthquake Commission (EQC).

At balance date, EQC recognises a liability in respect of outstanding claims and assesses the adequacy of its unearned premium liability. As required by financial reporting standards, a risk premium is applied to a central estimate to increase to 75% the likelihood that claims will be settled within this amount. No discount factor or inflation factor is applied to the claims liability as claims are generally settled within one year.

All assets held by ACC and EQC are considered available to back present and future claims obligations. ACC and EQC have not deferred any acquisition costs in respect of insurance obligations at the reporting date.

Analysis of ACC insurance liability

The material insurance obligations of the Crown at balance date are managed by ACC. The accounting for these claims is made complex by the existence of a long "tail" to these claims. The rest of this note therefore focuses on these claims. PricewaterhouseCoopers Actuarial Pty Limited have prepared the independent actuarial estimate of the ACC outstanding claims liability as at 30 June 2008. The actuary is satisfied with the nature, sufficiency and accuracy of the data used to determine the outstanding claims liability.

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