The claim basis calculation for general insurance business is determined by applying the following formula:

Average Gross Claims Incurred in the reference period X Reinsurance Allowance X Risk Factor (for each class of business)

Where:

Average Gross Claims Incurred =

Gross Claims Incurred in the reference period (see CA-2.1.15) divided by the number of years covered by the reference period (or annualised where any financial year in the reference period is other than 12 months)

Reinsurance Allowance (Claim basis) = (calculated on total business)

the higher of 0.5 or (Total Average Net Claims Incurred in the reference period/Total Average Gross Claims Incurred in the reference period)

Risk Factor =