1. 1 AEG New York, 23 -25 April 2012 Issues related to military expenditures and the definition of catastrophes in the measurement of non-life insurance AEG New York, 23 -25 April 2012

2. 2 Consumption of fixed capital on military expenditures

3. 3 SNA 1993 and SNA 2008 SNA 1993: Expenditure on military weapons systems to be recorded as intermediate consumption SNA 2008: Expenditure on military weapons systems to be recorded as fixed capital formation (used continuously in the production of defence services, even if their peacetime use is simply to provide deterrence)

4. 4 Conceptual issue How to account for losses due to the use of weapons systems during wartime and other military operations, as other changes in the volume of assets or as part of depreciation?

5. 5 Measurement issue What service lives and what depreciation profiles to be used in the calculation of consumption of fixed capital and capital stock?

6. 6 BEA depreciation rates/service lives Asset typeGeometric depreciation rate (percent) Service life (years) Aircraft: Air frames7 to 1115 to 25 Engines286 Strategic missilesN.A. (straight line)20 Ships6 to 725 to 30 Tanks and armored personnel carriers 820

7. 7 Definition of catastrophes in the measurement of non-life insurance

8. 8 SNA 1993 and SNA 2008 SNA 1993: –Output of non-life insurance: premiums + premium supplements (investment income attributed to policy holders) – claims –Claims to be recorded as current transfers SNA 2008: –Output of non-life insurance: adjusted premiums + adjusted premium supplements – adjusted claims (three approaches may be applied: expectations approach, accounting approach, cost approach) –Exceptionally large claims due to major catastrophes may be recorded as capital transfers

9. 9 Conceptual issue How to delineate claims to be recorded as capital transfers from those to be recorded as income transfers? –Should a major catastrophe be defined at the national level? –What about international consistency in the recording of cross-border transactions? –Alternative: ask the insurance industry to provide data on claims related to major catastrophes