Accounting Question

Assignment Question(s):(15 Marks)

Q1. Reinsurance is a form of insurance purchased by insurance companies in order to mitigate risk. Essentially, reinsurance can limit the amount of loss an insurer can potentially suffer. In other words, it protects insurance companies from financial ruin, thereby protecting the companies’ customers from uncovered losses. (5 Mark)

Questions:

a. How do reinsurance companies work?

b. What are the Reinsurance Contracts?

c. Give example of reinsurances companies in KSA and describe their main services

Q2. What is the concept of “Fair Value? Outline the basic difference between fair value and book value of an asset. Explain the key features of fair value defined by FASB ASC. (5 Marks)

Q3. XYZ Company has the following financial data:(5 marks)

Particulars

Total Profit for the Year

3

77,500

General Takaful Assets (Year 2014)

1,390,000

General Takaful Assets (Year 2015)

1,517,500

Cash

11,500

Short-term Investment

23,500

Short term liabilities

85,000

Underwriting Surplus Distributable to Participants/Participants’ Share of Profit

145,500

Gross Contribution

9

58,000

Net Contribution

662,500

Wakalah Fee

77,500

Commission Paid

28,300

Management Expense

58,000

Net Claim Incurred

287,500

632,500

Amounts (SAR)

Earned Contribution

You are required to calculate:

• Return on Assets
• Quick Liquidity
• Surplus Distribution Ratio
• Expense Ratio
• Claims Ratio