Insurance Contract Liabilities
Claims and premium reserves an insurance company owes policyholders, on the Balance Sheet. Only insurers under NFRS 17 use this.
In detail
This ledger exists for insurance companies reporting under NFRS 17, the standard for insurance contracts. It holds the insurer's obligation to policyholders: claims reported but not yet paid, claims incurred but not yet reported, and the unearned part of premiums already collected. An ordinary trading or travel company never posts here; its own insurance premiums are an expense under Insurance and any prepaid portion is an asset. For an insurer, the balance is remeasured every period from actuarial estimates and changes are charged to the Profit and Loss. Using this account for anything other than policyholder obligations would mislead the regulator, the Nepal Insurance Authority, and the auditor.
Formula
Insurance Contract Liabilities = Liability for incurred claims + Liability for remaining coverage
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Miscellaneous Expenses | Rs 30,00,000 | |
| Insurance Contract Liabilities | Rs 30,00,000 |
How to record it in BRAccount
- 01Obtain the actuarial valuation of outstanding claims and unearned premium at the period end.
- 02Go to Invoicing > Journal Entry > New dated the period end.
- 03Debit the claims expense account and credit Insurance Contract Liabilities with the increase.
- 04Submit. The entry below posts.
- 05When claims are paid, post a Journal Entry: Dr Insurance Contract Liabilities, Cr Bank.
- 06Reconcile the ledger with the claims register before filing with the Nepal Insurance Authority.
When to use it
Post by Journal Entry for claim reserves. A trading or travel company never needs it.
Example from the demo books
Dr Miscellaneous Expenses Rs 30,00,000, Cr Insurance Contract Liabilities Rs 30,00,000 for claims reported but not yet paid.