Notes to the financial statements Note 1 - Constitution
The United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited (“the Association”) is incorporated in Bermuda as a company limited by guarantee and having a statutory reserve but not share capital. The principal activities of the Association are the insurance and reinsurance of marine protecting and indemnity risks on behalf of the Members. The liability of the Members is limited to the calls and supplementary premiums set by the Directors and in the event of its liquidation, any net assets of the Association (including the Statutory Reserve) are to be returned equitably to those Members insured by it during the final five underwriting years.
Note 2 - Accounting policies
(a) Basis of preparation These financial statements have been prepared in accordance with accounting principles generally accepted in Bermuda and Canada. All transactions relate to continuing activities.
The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Subsequent results could differ from these estimates.
The Association has issued tradable securities on the London Stock Exchange. However the Association is not required to comply with the full disclosure requirements of the exchange since the securities are debt in nature.
(b) Basis of consolidation These consolidated financial statements include the results of the wholly owned subsidiary companies, International P&I Reinsurance Company Limited (“IPIR”), which is registered in the Isle of Man, and The United Kingdom Mutual Steam Ship Assurance (Europe) Limited (“UK Europe”). IPIR reinsures 90 per cent of the risks retained by the holding company. The Association is the sole member of UK Europe which insures certain European Members of the holding company where a European insurer is required by statute.
The Association accounts for its investment in Hydra Insurance Company Limited (“Hydra”) as a quasi-subsidiary. Hydra is a Bermudian segregated cell captive established by the International Group of P&I Clubs to reinsure part of the risk which clubs that are party to the Pooling Agreement previously reinsured in the market. Under the terms of the company’s byelaws, the governing instrument assets are segregated in separate cells in such a way that they can be used only to satisfy the liabilities of the ‘owning’ club. The results of the separate cell “owned” by the Association are consolidated within the group financial statements, with all inter-company transactions eliminated on consolidation.
(c) Annual accounting The consolidated statement of operations is prepared on an annual accounting basis and includes all the premiums for policies incepting in the year, the cost of claims incurred and reinsurance for the current year, and any adjustments relating to earlier years together with operating expenses and investment income. All revenue transactions appear in the statement of operations and are allocated to a policy year or to a reserve.
(d) Policy year accounting The calls and premiums, reinsurance premiums payable, claims and reinsurance recoveries and outstanding claims are all allocated to the policy years to which they relate. Both the realised and unrealised investment income and exchange gains and losses are allocated proportionately to the average balance of funds on each open policy year and the other funds at quarterly intervals. Operating expenses are allocated to the current policy year.
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