GIM6030 - Technical provisions: Unexpired Risks Provision

The unexpired risks provision (URP) is a provision for anticipated losses on the “unearned” portion of premiums that have been deferred to the following accounting period (see GIM2130). Paragraph 45 of Schedule 9A CA 1985 and paragraphs 117 to 124 of the 2005 SORP state that an unexpired risks provision (URP) should be set up where the expected claims and expenses attributable to the unexpired periods of policies in force at the balance sheet date exceeds the UPR, after deducting any deferred acquisition costs.

The Revenue did not generally argue, as it might once have done, that the URP represented an anticipation of a future loss and thus offended the principle that losses should not be anticipated for tax purposes. In the light of later developments in the relationship between tax and accounting, the view that the URP was not strictly allowable would probably have been incorrect. Accordingly, the creation of a URP to supplement the UPP was permissible where the supplementary reserve could be justified on a proper statistical basis.