8. 8.2 Short-term insurance liabilities (continued) Short-term insurance contracts – assumptions (continued) Liability for remaining coverage Insurance acquisition cash flows Onerous groups Where applicable, for groups of contracts that are onerous, the liability for remaining coverage is determined by the fulfilment cash flows. Any loss-recovery component is determined with reference to the loss component recognised on underlying contracts and the recovery expected on such claims from reinsurance contracts held. The Group is eligible and chooses to recognise acquisition cash flows as an expense immediately as incurred for the short-term insurance contracts issued. This is because all insurance contracts issued have a coverage period of one year or less. Liability for incurred claims The Group also has the right to pursue third parties for payment of some or all costs. Estimates of salvage recoveries and subrogation reimbursements are considered in the measurement of ultimate claims costs. The main assumption underlying these techniques is that a Group’s past claims development experience can be used to project future claims development and hence ultimate claims costs. These methods extrapolate the development of paid and incurred losses based on the observed development of earlier years and expected loss ratios. Historical claims are analysed by origin period. Large or catastrophe claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historical claims development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future to arrive at the estimated ultimate cost of claims that present the expected value outcome from the range of possible outcomes, taking account of all the uncertainties involved. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as Chain Ladder and Bornheutter-Ferguson methods, as well as an expected Ultimate Loss Ratio method. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 149 Notes to the Consolidated Financial Statements
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