Eighths system

What is Eighths system?

Eighths system is A method of calculating unearned premium, usually under a proportional reinsurance treaty where premium details are provided quarterly. Risks are assumed to attach on average on the middle day of each quarter. Therefore, at the end of a calendar year, 7/8ths of premiums on policies accepted in the first quarter are assumed to be earned, with 1/8th unearned, and so on.

 

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