There are three types of reserve in Incorporated Bodies performing insurance activities:

1. Reserve for unexpired risks

   It is an expense at the end of the previous year, which is carried forward as revenue at the beginning of the current year. This item is acceptable as a specific percentage of net premiums as follows:

   Marine insurance	25%
   Fire insurance	40%
   Motor and other insurance	40%

2. Outstanding claims reserve

   Genuinely, it is not accepted whether it is an expense at the end of the current year or revenue at the beginning of the current year. However, if the Incorporated Body has reported outstanding claims reserve as part of paid claims, only paid claims are acceptable to the extent of the supporting documents as per each type of policies after the excluding outstanding claims of the Incorporated Body at the beginning and end of the year.

3. Additional reserve

   It is not accepted whether it is an expense at the end of the current year or revenue at the beginning of the current year.

Second: Reinsurance from abroad

To accept reinsurance from abroad, the amount paid for reinsurance shall be compared to the amount of the claims recovered plus the commission received from reinsurance. In case the amount of the claims recovered together with the commission received is more than the amount paid for reinsurance, it is accepted. If not, the following shall be done:

1. Disallow an appropriate percentage of reinsurance premiums abroad after verifying the correctness of the documents thereof.

2. In case the Incorporated Body does not present an appropriate value of the recovered, these shall be estimated as follows:

   1. In case the Incorporated Body does not maintain the required books and registers, the value of the claims recovered are estimated from paid claims compared to percentage of reinsurance premiums together with direct premiums. (facultative reinsurance).

   2. In case of treaty reinsurance, excess loss reinsurance, surplus reinsurance, the claims recovered shall be estimated after the study of the documents thereof.

Third: Reinsurance commission

In case the Incorporated Body does not report a commission collected from reinsurance abroad at an appropriate percentage, the following shall done:

1. Estimation of a deemed percentage range from 20% to 30% of reinsurance amount.

2. Estimation of a commission percentage equivalent to the paid agent's commission.

Note: In case of treaty reinsurance, excess loss reinsurance, surplus reinsurance, the commission received shall be estimated after the study of the documents thereof.

Fourth: Agent's commission

With regard to the agent's commission, the nature of the agent's work with the incorporated body should be firstly ensured. The commission shall be treated as follows:

1. In case the agent is a producer agent and incurs administrative expenses of the Incorporated Body, the agent's contract with the Incorporated Body as well as the settlement thereto shall be verified. The allowable percentage of the commission should not exceed 35% of the total premiums.

2. In case, the agent works as an agent or sponsor or both of them, the allowable percentage shall be 2% of total premiums.

Fifth: Fees received

These are fees received from clients against the issuance of insurance polices by Incorporated Bodies. If these fees are collected by the agent or sponsor, the contract between the Incorporated Body and agent should be verified. However, if this is not stipulated in the contract, these fees shall be included in the Incorporated Body's revenues and not the agent's.

Sixth: Revenues not related to the main activity:

1. Deposits' interests

   In accordance with the Ministerial Resolution No (3) of 1966 as amended by Ministerial Resolution No (30) of 1975 issued by the Ministry of Commerce & Industry which obliges Incorporated Bodies practicing insurance activities to keep certain amount as annual deposit in a Kuwaiti bank. Therefore Incorporated Bodies practicing insurance activities shall include the interests on that deposit within their revenues.

2. Other revenues

   These revenues are represented in the profits from the sale of assets, profits from financial investments or any other revenues. An Incorporated Body shall include these various revenues in its tax declaration.

Seventh: Head Office Expenses

Eighth: The deemed inspection of the Incorporated Body practicing insurance activity:

The deemed profit shall be calculated in case there are no regular accounts for the Incorporated Bodies practicing insurance activities as follows:

Ninth: Special and exceptional cases relating to the inspection of Incorporated Bodies practicing insurance activities are treated separately after consulting the Tax Department in this regard.