MOTOR ACCIDENT COMMISSION

In reply to the Hon. I.F. EVANS (Davenport) (7 October 2010) (Estimates Committee A).

The Hon. J.J. SNELLING (Playford—Treasurer, Minister for Workers Rehabilitation, Minister for Defence Industries, Minister for Veterans' Affairs): The unexpired risk expense arises from the best estimate of the present value of future claims in respect of the unexpired risk period, (known as the premium liabilities). In other words, it is an estimate of the value of risks arising from premium income that MAC has received but has not yet earnt. The value of these risks is an actuarial calculation which takes into account a risk margin.

In the Statement of Comprehensive Income for 30 June 2009, an expense of $12.7m was recorded for the un-expired risk expense. At 30 June 2010, actuarial calculations resulted in a positive adjustment of $11.7m being recorded in the accounts for the un-expired risk expense. The variance in these two numbers over the two years is $24.4million. The amount recorded on an annual basis is an actuarial calculation of the value of the outstanding risks and is subject to fluctuation.