Work out the value, at the end of an income year, of a * general insurance company's liability for * outstanding claims under * general insurance policies in this way:
Method statement
Step 1. Add up the amounts that, at the end of the income year, the company determines, based on proper and reasonable estimates, to be appropriate to set aside and invest in order to meet:
(a) liabilities for outstanding claims under those policies; and
(b) direct settlement costs associated with those outstanding claims.
Step 2. Reduce the step 1 amount by so much of it as the company expects at the end of the income year to recover:
(a) under a contract of reinsurance; or
(b) in any other way;
other than under a contract of reinsurance to which subsection 148(1) of the Income Tax Assessment Act 1936 (about reinsurance with non - residents) applies.