{"id":"F2005B01401","name":"AASB 1023 - General Insurance Contracts - July 2004","slug":"aasb-1023-general-insurance-contracts-july-2004","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":32548,"registerId":"commonwealth-F2005B01401-current","compilationNumber":null,"startDate":"2026-04-01","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Application","content":"1 Application\n\n1.1 \\[Deleted by the AASB\\]\n\nAusCF1 AusCF paragraphs included in this Standard apply only to:\n\n(a) not-for-profit entities; and\n\n(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).\n\nSuch entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs.\n\n1.2 This Standard applies to annual reporting periods beginning on or after 1 January 2005.  \n\\[Note: For application dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]\n\n1.3 This Standard shall not be applied to annual reporting periods beginning before 1 January 2005.\n\n1.4 \\[Deleted by the AASB\\]\n\n1.4.1 \\[Deleted by the AASB\\]\n\n1.4.2 For the purposes of AASB 134 Interim Financial Reporting, the determination of the outstanding claims liability does not necessarily require a full actuarial valuation. In accordance with AASB 134, the outstanding claims liability would need to be determined on a reliable basis, would be based on reasonable estimates, would include a full review of all assumptions, and would not be materially different from the outstanding claims liability determined by a full actuarial valuation.\n\n1.5 When applicable, this Standard supersedes:\n\n(a) Accounting Standard AASB 1023 Financial Reporting of General Insurance Activities as approved by notice published in the Commonwealth of Australia Gazette No S 415, 6 November 1996; and\n\n(b) AAS 26 Financial Reporting of General Insurance Activities issued in November 1996.\n\n1.6 Both AASB 1023 (issued in November 1996) and AAS 26 remain applicable until superseded by this Standard.\n\n1.7 Notice of this Standard was published in the Commonwealth of Australia Gazette No S 294, 22 July 2004.\n\n","sortOrder":0},{"sectionNumber":"2","sectionType":"section","heading":"Scope","content":"2 Scope\n\nGeneral Insurance Contracts\n\n2.1 This Standard applies to:\n\n(a) general insurance contracts (including general reinsurance contracts) that a general insurer issues and to general reinsurance contracts that it holds;\n\n(b) certain assets backing general insurance liabilities;\n\n(c) financial liabilities and financial assets that arise under non-insurance contracts; and\n\n(d) certain assets backing financial liabilities that arise under non-insurance contracts.\n\n2.1.1 There are various types of insurance contract. This Standard deals with general insurance contracts (including general reinsurance contracts). General insurance contracts are defined as insurance contracts that are not life insurance contracts.\n\n2.1.2 This Standard applies to general insurance contracts issued by Registered Health Benefits Organisations (RHBOs) registered under the National Health Act 1953. RHBOs apply this Standard to contracts that meet the definition of a general insurance contract and to certain assets backing general insurance liabilities.\n\n2.1.3 For ease of reference, this Standard describes any entity that issues an insurance contract as an insurer, whether or not the issuer is regarded as an insurer for legal, regulatory or supervisory purposes.\n\n2.1.4 A reinsurance contract is a type of insurance contract. Accordingly, all references in this Standard to insurance contracts also apply to reinsurance contracts.\n\n2.1.5 Weather derivatives that meet the definition of a general insurance contract under this Standard are treated under this Standard. A contract that requires payment based on climatic, geological or other physical variables only where there is an adverse effect on the contract holder is a weather derivative that is an insurance contract. To meet the definition of a general insurance contract, the physical variable specified in the contract will be specific to a party to the contract.\n\nTransactions Outside the Scope of this Standard\n\n2.2 This Standard does not apply to:\n\n(a) life insurance contracts (see AASB 1038 Life Insurance Contracts);\n\n(b) product warranties issued directly by a manufacturer, dealer or retailer (see AASB 15 Revenue from Contracts with Customers and AASB 137 Provisions, Contingent Liabilities and Contingent Assets);\n\n(c) employers’ assets and liabilities under employee benefit plans (see AASB 119 Employee Benefits and AASB 2 Share-based Payment) and retirement benefit obligations reported by defined benefit retirement plans (see AASB 1056 Superannuation Entities);\n\n(d) contingent consideration payable or receivable in a business combination (see AASB 3 Business Combinations);\n\n(e) contractual rights or contractual obligations that are contingent on the future use of, or right to use, a non-financial item (for example, some license fees, royalties, variable lease payments and similar items), as well as a lessee’s residual value guarantee embedded in a lease (see AASB 15, AASB 16 Leases and AASB 138 Intangible Assets);\n\n(f) financial guarantee contracts unless the issuer has previously asserted explicitly that it regards such contracts as insurance contracts and has used accounting applicable to insurance contracts, in which case the issuer may elect to apply either AASB 9 Financial Instruments, AASB 132 Financial Instruments: Presentation and AASB 7 Financial Instruments: Disclosures or this Standard to such financial guarantee contracts. The issuer may make that election contract by contract, but the election for each contract is irrevocable;\n\n(g) direct insurance contracts that the entity holds (that is direct insurance contracts in which the entity is a policyholder). However, a cedant shall apply this Standard to reinsurance contracts that it holds; and\n\n(h) fixed-fee service contracts, that meet the definition of an insurance contract, if the level of service depends on an uncertain event, for example maintenance contracts or roadside assistance contracts (see AASB 4 Insurance Contracts).\n\nEmbedded Derivatives\n\n2.3.1 AASB 9 Financial Instruments requires hybrid contracts that contain financial asset hosts to be classified and measured in their entirety in accordance with the requirements in paragraphs 4.1.1-4.1.5 of that Standard. However, AASB 9 requires an entity to separate some embedded derivatives from their financial liability hosts, measure them at fair value and include changes in their fair value in the statement of comprehensive income. AASB 9 applies to derivatives embedded in a general insurance contract unless the embedded derivative is itself a general insurance contract.\n\n2.3.2 As an exception to the requirement in AASB 9, an insurer need not separate, and measure at fair value, a policyholder’s option to surrender an insurance contract for a fixed amount (or for an amount based on a fixed amount and an interest rate) even if the exercise price differs from the carrying amount of the host insurance liability. However, the requirement in AASB 9 applies to a put option or cash surrender option embedded in an insurance contract if the surrender value varies in response to the change in a financial variable (such as an equity or commodity price or index), or a non-financial variable that is not specific to a party to the contract. Furthermore, that requirement also applies if the holder’s ability to exercise a put option or cash surrender option is triggered by a change in such a variable (for example, a put option that can be exercised if a stock market index reaches a specified level).\n\nDeposit Components\n\n2.4.1 Some general insurance contracts contain both an insurance component and a deposit component. In some cases, an insurer is required or permitted to unbundle those components.\n\n(a) Unbundling is required if both the following conditions are met:\n\n(i) the insurer can measure the deposit component (including any embedded surrender options) separately (that is, without considering the insurance component); and\n\n(ii) the insurer’s accounting policies do not otherwise require it to recognise all obligations and rights arising from the deposit component.\n\n(b) Unbundling is permitted, but not required, if the insurer can measure the deposit component separately as in paragraph 2.4.1(a)(i) but its accounting policies require it to recognise all obligations and rights arising from the deposit component, regardless of the basis used to measure those rights and obligations.\n\n(c) Unbundling is prohibited if an insurer cannot measure the deposit component separately as in paragraph 2.4.1(a)(i).\n\n2.4.2 The following is an example of a case when an insurer’s accounting policies do not require it to recognise all obligations arising from a deposit component. A cedant receives compensation for losses from a reinsurer, but the contract obliges the cedant to repay the compensation in future years. That obligation arises from a deposit component. If the cedant’s accounting policies would otherwise permit it to recognise the compensation as income without recognising the resulting obligation, unbundling is required.\n\n2.4.3 A general insurer, in considering the need to unbundle the deposit component of the general insurance contract, would consider all expected cash flows over the period of the contract and would consider the substance of the contract. For example, while some financial reinsurance contracts may require annual renewal, in substance they may be expected to be renewed for a number of years.\n\n2.4.4 To unbundle a general insurance contract, an insurer shall:\n\n(a) apply this Standard to the insurance component; and\n\n(b) apply AASB 9 to the deposit component. When applying AASB 9, an insurer shall designate the deposit component as “at fair value through profit or loss”, on first application of this Standard or on initial recognition of the deposit component.\n\n","sortOrder":1},{"sectionNumber":"3","sectionType":"section","heading":"Purpose of Standard","content":"3 Purpose of Standard\n\n3.1 The purpose of this Standard is to:\n\n(a) specify the manner of accounting for general insurance contracts consistent with AASB 4;\n\n(b) specify certain aspects of accounting for assets backing general insurance liabilities;\n\n(c) specify certain aspects of accounting for non-insurance contracts; and\n\n(d) require disclosure of information relating to general insurance contracts.\n\n","sortOrder":2},{"sectionNumber":"4","sectionType":"section","heading":"Premium Revenue","content":"4 Premium Revenue\n\nClassification\n\n4.1.1 Premium revenue comprises:\n\n(a) premiums from direct business, that is, premiums paid by a policyholder (that is neither an insurer nor reinsurer) to a general insurer; and\n\n(b) premiums from reinsurance business, that is, premiums received by a reinsurer from an insurer or from another reinsurer.\n\n4.1.2 Premiums from direct business arise from contracts when a policyholder transfers significant insurance risk to an insurer.\n\n4.1.3 Premiums from reinsurance business arise from contracts when an insurer or reinsurer transfers significant insurance risk to another reinsurer.\n\nRecognition\n\n4.2 Premium revenue shall be recognised from the attachment date as soon as there is a basis on which it can be reliably estimated.\n\n4.2.1 The amount of premium is determined by a general insurer or reinsurer so as to cover anticipated claims, reinsurance premiums, administrative, acquisition and other costs, and a profit component (having regard to expected income from the investment of premiums). The amounts collected in respect of these components are income of an insurer on the basis that they are collected in consideration for the insurer rendering services by indemnifying those insured against specified losses.\n\n4.2.2 For certain classes of general insurance business, government authorities may require the payment of levies and charges. For example, workers’ compensation insurance levies, annual licence fees and fire brigade charges may apply. Such levies and charges are expenses of the insurer, rather than government charges directly upon those insured. The insurer is not acting simply as a collector of these levies and charges. Although not compelled to collect these amounts from those insured, the insurer is entitled to include in premiums an amount to cover the estimated amount of the levies and charges. The insurer is usually responsible for paying the levies and charges at a later date. The amount paid by the insurer does not depend on the amounts collected from those insured in relation to the levies and charges. Therefore, the amounts collected to meet levies and charges are income of the insurer. The insurer accrues for all levies and charges expected under the general insurance contracts written in the period.\n\n4.2.3 In most States, stamp duty is charged on individual general insurance contracts and is separately identified by insurers on policy documents. The insurer is normally required to collect and pass on to the government an equivalent amount. Because such stamp duty is a tax collected on behalf of a third party and there is no choice on the part of the insurer but to collect the duty from the insured, it is not income of the insurer. Similarly, Goods and Services Tax (GST) is not income of the insurer.\n\n4.2.4 Premium revenue needs to be recognised from the date of the attachment of risk in relation to each general insurance contract because insurers earn premium revenue by assuming insurance risks from that date on behalf of those insured. However, for reasons of practicality, many general insurers use bases of recognition that attempt to approximate this date. Such bases are acceptable provided that they do not result in the recognition of a materially different amount of premium revenue in a particular reporting period than would be the case if recognition occurred from the date of attachment of risk for each general insurance contract.\n\n4.2.5 In recognising premium from the attachment date, an insurer may recognise premiums relating to general insurance contracts when the contract period commences after the reporting period, commonly referred to as premiums in advance. The attachment date is the date from which an insurer accepts risk. An insurer may accept risk prior to the date a contract commences: for example, it is not unusual for insurers to issue renewals, and for renewals to be paid for by policyholders, prior to the commencement date of an insurance contract. For commercial lines insurance, where the policyholder may be using the services of an insurance broker, the renewal terms could be agreed by both the insurer and policyholder prior to the commencement date and before the policyholder has paid the premium. In this situation, there may also have been a transfer of risk. As premiums in advance relate entirely to insurance cover to be provided in a future period, premiums in advance are recognised as part of the unearned premium liability. Premiums in advance are considered as part of the liability adequacy test required by section 9.\n\nReinsurance premiums\n\n4.2.6 From the perspective of the reinsurer, reinsurance premiums accepted are akin to premiums accepted by a direct insurer. The reinsurer recognises inwards reinsurance premiums ceded to it as revenue in the same way as a direct insurer treats the acceptance of direct premiums as revenue.\n\n4.2.7 Premiums accepted by the reinsurer are recognised from the attachment date, that is, the date from which the reinsurer bears its proportion of the relevant risks underwritten by the cedant. Reinsurers usually use bases of recognition that approximate the dates of bearing the risks. For example, the reinsurer may assume that its acceptance of risks occurs from the middle of the period for which the aggregate ceded premiums are advised by the cedant. This approach is acceptable provided that the premiums received or receivable in respect of the reporting period are recognised in that period, whether or not the periodic advice from the cedant has been received.\n\nMeasurement\n\n4.3 Premium revenue shall be recognised in the statement of comprehensive income from the attachment date:\n\n(a) over the period of the general insurance contract for direct business; or\n\n(b) over the period of indemnity for reinsurance business;\n\nin accordance with the pattern of the incidence of risk expected under the general insurance contract.\n\n4.4 In the case of business where the premium is subject to later adjustment, the adjusted premium shall be used, where possible, as the basis for recognising premium revenue. Where this is not possible, the deposit premium, adjusted for any other relevant information, shall be recognised as the premium revenue, provided that it is expected that this amount will not be materially different from the actual amount of premium.\n\n4.4.1 Premium revenue is recognised in the statement of comprehensive income when it has been earned. An insurance contract involves the transfer of significant insurance risk. The insurer estimates the pattern of the incidence of risk over the period of the contract for direct business, or over the period of indemnity for reinsurance business, and the premium revenue is recognised in accordance with this pattern. This results in the allocation of the premium revenue and the claims incurred expense and hence the gross underwriting result over the period of the contract for direct business, or over the period of indemnity for reinsurance business, in accordance with the pattern of the incidence of risk.\n\n4.4.2 Measuring premium revenue involves the following steps:\n\n(a) estimating the total amount of premium revenue expected under the contract;\n\n(b) estimating the total amount of claims expenses expected under the contract and estimating when the claims are expected to arise;\n\n(c) estimating the pattern of the incidence of risk from the result of (b); and\n\n(d) recognising the premium revenue under the contract identified in (a) when it will be earned, that is, in accordance with the pattern of the incidence of risk determined in (c).\n\n4.4.3 For some general insurance contracts, especially complex multi-year reinsurance contracts, these estimations involve the use of significant judgement. The estimates are reassessed at the end of each reporting period. This prospective estimate of all of the income and expenses expected under the contract is also necessary for the purposes of the liability adequacy test. Refer to section 9.\n\nDirect business\n\n4.4.4 For most direct general insurance contracts the specified period of the contract is one year. For many direct insurance contracts the pattern of the incidence of risk will be linear, that is, the risk of events occurring that will give rise to claims is evenly spread throughout the contract period. For these contracts the premium revenue will be earned evenly over the period of the contract. However, for some direct insurance contracts the risk of events occurring that will give rise to claims is not evenly spread throughout the contract. For example, with motor insurance contracts, the risk of events occurring that will give rise to claims may be subject to seasonal factors.\n\n4.4.5 Insurers estimate the pattern of the incidence of risk expected under the general insurance contracts from the attachment date. An insurer may be able to reliably estimate the pattern for a particular type of insurance business based upon past experience. However, when there have been changes in the nature of the cover provided, or, when there has been a change in loss experience, the insurer reflects this in the estimations.\n\nReinsurance business\n\n4.4.6 Reinsurers recognise reinsurance premiums over the period of indemnity provided by the reinsurance contract in accordance with the pattern of the incidence of risk. For a typical twelve-month proportional treaty, such as a quota share treaty, written on a “risks attaching basis”, the period of indemnity will be twenty-four months, as the proportional treaty will indemnify the direct insurer (or, for retrocession, the reinsurer) for losses arising under direct policies written during the twelve-month contract period. Hence, an underlying annual direct contract written on the last day of the reinsurance contract has twelve months of insurance cover beyond the last day of the reinsurance contract. The reinsurer estimates the pattern of the incidence of risk over the twenty-four-month indemnity period.\n\n4.4.7 The reinsurer may be able to reliably estimate the pattern for a particular type of reinsurance business based upon past experience. The reinsurer is likely to seek information from the cedant to estimate the pattern of the incidence of loss expected. When there have been changes in the nature of the cover provided or when there has been a change in loss experience the insurer will need to reflect this in the estimations.\n\n4.4.8 To determine the pattern of the incidence of risk, reinsurers first determine the total reinsurance premiums expected under the contract. The premiums receivable under reinsurance treaties often depend on the volume of business written by the cedant after the reporting period but before the treaty expiry date. This is always true of proportional (quota share and surplus) treaties that span the end of the reporting period, and is often true of non-proportional treaties. For such treaties, to estimate the total premium revenue expected under the reinsurance contract, the reinsurer estimates the inwards reinsurance premium it will receive under the contract by estimating the gross premium revenue that the cedant is likely to receive. The reinsurer is likely to estimate this by communicating with the cedant, and by reviewing past experience.\n\n4.4.9 For a typical non-proportional treaty, such as an excess of loss treaty, the period of indemnity is usually the same as the contract period. For example, an excess of loss treaty could indemnify a cedant for all claims incurred above the excess (either individual claims or in aggregate) during the contract period, or for all claims made during the contract period. For some of these contracts the pattern of the incidence of risk is likely to be linear and hence for these contracts the premium revenue expected under the contract is earned evenly over the contract period.\n\n4.4.10 With a non-proportional treaty the reinsurer estimates the total liabilities that are likely to arise under the underlying insurance contracts to enable an estimation of the total inwards reinsurance premium revenue expected under the contract. Where relevant, the reinsurer estimates whether the cedant is likely to want to reinstate the contract, in which case the reinsurer considers the additional reinstatement premiums it is expected to receive and the extent that they may have been earned at the end of the reporting period. A reinsurer liaises closely with the cedant, reviews any market information on significant losses or events that may have arisen, for example a hailstorm or earthquake, and reviews past experience.\n\n4.4.11 Some reinsurance contracts might involve an experience account. Whilst such contracts may require annual renewal, in substance the contract period is likely to be greater than one year. In estimating the total inwards reinsurance premium expected under the contract and in estimating the total reinsurance claims, to determine the pattern of the incidence of risk, the reinsurer considers the probability-weighted expected cash flows over the expected period of the contract, and discounts these cash flows to reflect the time value of money. Section 6 discusses the determination of discount rates. In determining the expected cash flows, the reinsurer considers any cash flows such as profit commissions and commission rebates.\n\nAdjusted premiums\n\n4.4.12 For some classes of insurance it is usual for the premium to be adjusted as a result of events and information that only become known during or after the insurance contract period. For example, marine cargo insurance is a type of “adjustable” business for which a deposit premium is paid at the beginning of the contract period and subsequently adjusted on the basis of a cargo declaration.\n\nUnclosed Business\n\n4.5 Premium revenue relating to unclosed business shall be recognised in accordance with paragraphs 4.2, 4.3 and 4.4.\n\n4.5.1 Frequently, there is insufficient information available at the end of a reporting period to enable a general insurer to accurately identify the business written close to the end of the reporting period for which the date of attachment of risk is prior to the end of the reporting period. This is often referred to as unclosed business. Consistent with the principle stated in paragraph 4.2, that premium revenue is to be recognised from the attachment date, all unclosed business is estimated and the premium relating to unclosed business included in premium revenue.\n\n4.5.2 Estimates of the amount of unclosed business can be made using information from prior periods adjusted for the impact of recent trends and events. In addition, information about unclosed business may become available after the reporting period and before the financial statements are authorised for issue and may enable more reliable estimates to be made.\n\n","sortOrder":3},{"sectionNumber":"5","sectionType":"section","heading":"Outstanding Claims Liability","content":"5 Outstanding Claims Liability\n\nRecognition and Measurement\n\n5.1 An outstanding claims liability shall be recognised in respect of direct business and reinsurance business and shall be measured as the central estimate of the present value of the expected future payments for claims incurred with an additional risk margin to allow for the inherent uncertainty in the central estimate.\n\n5.1.1 The recognition and measurement approach requires estimation of the probability-weighted expected cost (discounted to a present value) of settling claims incurred, and the addition of a risk margin to reflect inherent uncertainty in the central estimate.\n\n5.1.2 The longer the expected period from the end of the reporting period to settlement, the more likely it is that the ultimate cost of settlement will be affected by inflationary factors likely to occur during the period to settlement. These factors include changes in specific price levels, for example, trends in average periods of incapacity and in the amounts of court awards for successful claims. For claims expected to be settled within one year of the end of the reporting period, the impact of inflationary factors might not be material.\n\n5.1.3 For claims expected to be settled within one year of the end of the reporting period, where the amount of the expected future payments does not differ materially from the present value of those payments, insurers would not need to discount the expected future payments.\n\nCentral Estimate\n\n5.1.4 In estimating the outstanding claims liability, a central estimate is adopted. If all the possible values of the outstanding claims liability are expressed as a statistical distribution, the central estimate is the mean of that distribution.\n\n5.1.5 In estimating the outstanding claims liability, an insurer may make use of case estimates of individual reported claims that remain unsettled at the end of the reporting period. An insurer may base case estimates on the most likely claim costs. Where the range in potential outcomes is small, the likely cost may be close to the mean cost. However, where the potential range in outcomes is large and where the probability distribution may be highly skewed, the most likely cost, or the mode, could be below the mean and hence below the central estimate. In this situation, the insurer would need to increase the case estimates accordingly to ensure that they represent the central estimate.\n\nRisk Margin\n\n5.1.6 The outstanding claims liability includes, in addition to the central estimate of the present value of the expected future payments, a risk margin that relates to the inherent uncertainty in the central estimate of the present value of the expected future payments.\n\n5.1.7 Risk margins are determined on a basis that reflects the insurer’s business. Regard is had to the robustness of the valuation models, the reliability and volume of available data, past experience of the insurer and the industry and the characteristics of the classes of business written.\n\n5.1.8 The risk margin is applied to the net outstanding claims for the entity as a whole. The overall net uncertainty has regard to:\n\n(a) the uncertainty in the gross outstanding claims liability;\n\n(b) the effect of reinsurance on (a); and\n\n(c) the uncertainty in reinsurance and other recoveries due.\n\n5.1.9 In practice, however, outstanding claims liabilities are often estimated on a class-by-class basis, including an assessment of the uncertainty in each class and the determination of a risk margin by class of business. When these estimates are combined for all classes, the central estimates are combined, however the risk margin for all classes when aggregated may be determined by some insurers to be less than the sum of the individual risk margins. The extent of the difference that some insurers may decide to recognise is likely to depend upon the degree of diversification between the different classes and the degree of correlation between the experiences of these classes.\n\n5.1.10 For the purposes of the liability adequacy test, required by section 9, the risk margin for the entity as a whole is apportioned across portfolios of contracts that are subject to broadly similar risks and are managed together as a single portfolio.\n\n5.1.11 Risk margins adopted for regulatory purposes may be appropriate risk margins for the purposes of this Standard, or they may be an appropriate starting point in determining such risk margins.\n\nExpected Future Payments\n\n5.2 The expected future payments shall include:\n\n(a) amounts in relation to unpaid reported claims;\n\n(b) claims incurred but not reported (IBNR);\n\n(c) claims incurred but not enough reported (IBNER); and\n\n(d) costs, including claims handling costs, which the insurer expects to incur in settling these incurred claims.\n\n5.2.1 It is important to identify the components of the ultimate cost to an insurer of settling incurred claims, for the purposes of determining the claims expense for the reporting period and determining the outstanding claims liability as at the end of the reporting period. These components comprise the policy benefit amounts required to be paid to or on behalf of those insured, and claims handling costs, that is, costs associated with achieving settlements with those insured. Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.\n\n5.2.2 Policy benefit amounts and direct claims handling costs are expenses of an insurer, representing the consumption or loss of economic benefits. The outstanding claims liability includes unpaid policy benefits and direct claims handling costs relating to claims arising during current and prior reporting periods, as they are outgoings that an insurer is presently obliged to meet as a result of past events.\n\n5.2.3 Indirect claims handling costs incurred during the reporting period are also expenses of an insurer, and include a portion of the indirect claims handling costs to be paid in the future, being that portion which relates to handling claims incurred during the reporting period. The outstanding claims liability includes these unpaid indirect claims handling costs.\n\n5.2.4 It is important to ensure that claims are recognised as expenses and liabilities for the correct reporting period. For contracts written on a claims incurred basis, claims arise from insured events that occur during the insurance contract period. Some events will occur and give rise to claims that are reported to the insurer and settled within the same reporting period. Other reported claims may be unsettled at the end of a particular reporting period. In addition, there may be events that give rise to claims that, at the end of a reporting period, have yet to be reported to the insurer. The latter are termed claims incurred but not reported (IBNR claims). The insurer also considers the need to recognise a liability for claims that may be re-opened after the reporting period.\n\n5.2.5 For contracts written on a claims made basis, claims arise in respect of claims reported during the insurance contract period. The insured event that gave rise to the claim could have occurred in a previous period. While claims made insurance contracts should theoretically only give rise to outstanding claims liabilities and IBNER claims (see paragraph 5.2.10), as claims cannot be incurred but not reported under such a contract, this may not be the case for reinsurers. A reinsurer may have reinsured a claims made contract on a claims incurred basis. In this case whilst a loss or other event would be reported to the direct insurer during the period of insurance to generate a valid claim, the reinsurer may not have received information about the claim but would have an IBNR liability. Similarly, a reinsurer may have issued a claims made reinsurance contract but may need to consider that not all notices of claims may have been reported by the direct insurer. Insurers and reinsurers should also consider court rulings that may impact on the way claims made contracts are interpreted.\n\n5.2.6 Claims arising from events that occur during a reporting period and which are settled during that same period are expenses of that period. In addition, a liability and corresponding expense is recognised for reported claims arising from events of the reporting period that have yet to be settled. This involves a process of estimation that includes assessment of individual claims and past claims experience.\n\n5.2.7 When, based on knowledge of the business, IBNR claims are expected to exist, an estimate is made of the amount of the claims that will arise therefrom. This involves recognition of a liability and corresponding expense for the reporting period. As in the case of reported but unsettled claims, an estimate of the amount of the current claims incurred but not reported is based on past experience and takes into account any changes in circumstances, such as recent catastrophic events that may have occurred during the reporting period and changes in the volume or mix of insurance contracts underwritten, that may affect the pattern of unreported claims.\n\n5.2.8 Some insurers use estimations or formulae, related to the amount of outstanding claims and based on the past experience of the insurer and the industry, to arrive at an estimate of direct and indirect claims handling costs.\n\n5.2.9 Claims expense and the outstanding claims liability are adjusted on the basis of information, including re-opened claims, that becomes available after the initial recognition of claims, to enable the insurer to make a more accurate estimate of the ultimate cost of settlement. This is often referred to as claims development. As is the case with other liabilities, the effect of the adjustments to the liability for outstanding claims and to claims expense is recognised in the statement of comprehensive income when the information becomes available.\n\n5.2.10 Where further information becomes available about reported claims and reveals that the ultimate cost of settling claims has been under-estimated, the upwards adjustment to claims expense and to the liability for outstanding claims is often referred to as claims incurred but not enough reported (IBNER claims). Where further information reveals that the ultimate cost of settling claims has been over-estimated, the adjustment is sometimes referred to as negative IBNER claims.\n\n5.2.11 Appropriate allowance is made for future claim cost escalation when determining the central estimate of the present value of the expected future payments. Future claims payments may increase over current levels as a result of wage or price inflation, and as a result of superimposed inflation (cost increases) due to court awards, environmental factors or economic or other causes.\n\n5.2.12 With inwards reinsurance claims the reinsurer will receive periodic advices from each cedant. These may include aggregate information relating to the claims liability. The reinsurer measures its outstanding claims liability on the basis of this information and its past experience of the claims payments made under reinsurance arrangements. The reinsurer also considers market knowledge of losses and other events such as hailstorms or earthquakes.\n\n","sortOrder":4},{"sectionNumber":"6","sectionType":"section","heading":"Discount Rates","content":"6 Discount Rates\n\n6.1 The outstanding claims liability shall be discounted for the time value of money using risk-free discount rates that are based on current observable, objective rates that relate to the nature, structure and term of the future obligations.\n\n6.1.1 The discount rates adopted are not intended to reflect risks inherent in the liability cash flows, which might be allowed for by a reduction in the discount rate in a fair value measurement, nor are they intended to reflect the insurance and other non-financial risks and uncertainties reflected in the outstanding claims liability. The discount rates are not intended to include allowance for the cost of any options or guarantees that are separately measured within the outstanding claims liability.\n\n6.1.2 Typically, government bond rates may be appropriate discount rates for the purposes of this Standard, or they may be an appropriate starting point in determining such discount rates.\n\n6.1.3 The portion of the increase in the liability for outstanding claims from the end of the previous reporting period to the end of the current reporting period which is due to discounted claims not yet settled being one period closer to settlement, ought, conceptually, to be recognised as interest expense of the current reporting period. However, it is considered that the costs of distinguishing this component of the increase in the outstanding claims liability exceed the benefits that may be gained from its disclosure. Thus, such increase is included in claims expense for the current reporting period.\n\n","sortOrder":5},{"sectionNumber":"7","sectionType":"section","heading":"Unearned Premium Liability","content":"7 Unearned Premium Liability\n\n7.1 Premium that has not been recognised in the statement of comprehensive income is premium that is unearned and shall be recognised in the statement of financial position as an unearned premium liability.\n\n7.1.1 The unearned premium liability is to meet the costs, including the claims handling costs, of future claims that will arise under current general insurance contracts and the deferred acquisition costs that will be recognised as an expense in the statement of comprehensive income in future reporting periods.\n\n","sortOrder":6},{"sectionNumber":"8","sectionType":"section","heading":"Acquisition Costs","content":"8 Acquisition Costs\n\n8.1 Acquisition costs incurred in obtaining and recording general insurance contracts shall be deferred and recognised as assets where they can be reliably measured and where it is probable that they will give rise to premium revenue that will be recognised in the statement of comprehensive income in subsequent reporting periods. Deferred acquisition costs shall be amortised systematically in accordance with the expected pattern of the incidence of risk under the related general insurance contracts.\n\n8.1.1 Acquisition costs are incurred in obtaining and recording general insurance contracts. They include commission or brokerage paid to agents or brokers for obtaining business for the insurer, selling and underwriting costs such as advertising and risk assessment, the administrative costs of recording policy information and premium collection costs.\n\n8.1.2 Because such costs are usually incurred at acquisition whilst the pattern of earnings occurs throughout the contract periods, which may extend beyond the end of the reporting period, those acquisition costs which lead to obtaining future benefits for the insurer are recognised as assets.\n\n8.1.3 For an asset to be recognised, it will be probable that the future economic benefits will eventuate, and that it possesses a cost or other value that can be measured reliably. Direct acquisition costs such as commission or brokerage are readily measurable. However, it may be difficult to reliably measure indirect costs that give rise to premium revenue, such as administration costs, because it is difficult to associate them with particular insurance contracts.\n\n","sortOrder":7},{"sectionNumber":"9","sectionType":"section","heading":"Liability Adequacy Test","content":"9 Liability Adequacy Test\n\n9.1 The adequacy of the unearned premium liability shall be assessed by considering current estimates of the present value of the expected future cash flows relating to future claims arising from the rights and obligations under current general insurance contracts. If the present value of the expected future cash flows relating to future claims arising from the rights and obligations under current general insurance contracts, plus an additional risk margin to reflect the inherent uncertainty in the central estimate, exceed the unearned premium liability less related intangible assets and related deferred acquisition costs, then the unearned premium liability is deficient. The entire deficiency shall be recognised in the statement of comprehensive income. In recognising the deficiency in the statement of comprehensive income the insurer shall first write-down any related intangible assets and then the related deferred acquisition costs. If an additional liability is required this shall be recognised in the statement of financial position as an unexpired risk liability. The liability adequacy test for the unearned premium liability shall be performed at the level of a portfolio of contracts that are subject to broadly similar risks and are managed together as a single portfolio.\n\n9.1.1 In determining the present value of the expected future cash flows relating to future claims arising from the rights and obligations under current general insurance contracts, the insurer applies sections 5 and 6 and includes an appropriate risk margin to reflect inherent uncertainty in the central estimate, as set out in paragraphs 5.1.6 to 5.1.11.\n\n9.1.2 Whilst the probability of adequacy adopted in performing the liability adequacy test may be the same or similar to the probability of adequacy adopted in determining the outstanding claims liability, this Standard does not require the same or similar probabilities of adequacy. However, the users of financial statements need to be presented with information explaining any differences in probabilities of adequacy adopted, and insurers are required to disclose the reasons for any differences in accordance with paragraph 17.8(e).\n\n9.1.3 The unearned premium liability may include premiums in advance as described in paragraph 4.2.5. Insurers also consider whether there are any additional general insurance contracts, where the premium revenue is not recognised in the unearned premium liability, under which the insurer has a constructive obligation to settle future claims that may arise. That is, there may be general insurance contracts where there has not been a transfer of risk, as described in paragraph 4.2.5, but where a constructive obligation has arisen. The cash flows expected under these contracts are considered as part of the liability adequacy test.\n\n9.1.4 In reviewing expected future cash flows, the insurer takes into account both future cash flows under insurance contracts it has issued and the related reinsurance.\n\n9.1.5 The related intangible assets referred to in paragraph 9.1 are those that arise under paragraph 13.3.1(b). As the liability adequacy test for the unearned premium liability is performed at the level of portfolios of contracts that are subject to broadly similar risks and are managed together as a single portfolio, the intangible asset is allocated on a reasonable basis across these portfolios.\n\n9.1.6 As the liability adequacy test applies to deferred acquisition costs and to intangible assets, these assets are excluded from the scope of AASB 136 Impairment of Assets.\n\n","sortOrder":8},{"sectionNumber":"10","sectionType":"section","heading":"Outwards Reinsurance Expense","content":"10 Outwards Reinsurance Expense\n\n10.1 Premium ceded to reinsurers shall be recognised by the cedant as outwards reinsurance expense in the statement of comprehensive income from the attachment date over the period of indemnity of the reinsurance contract in accordance with the expected pattern of the incidence of risk.\n\n10.1.1 It is common for general insurers or reinsurers to reinsure a portion of the risks that they accept. To secure reinsurance cover, the cedant passes on a portion of the premiums received to a reinsurer. This is known as outwards reinsurance expense.\n\n10.1.2 The cedant accounts for direct insurance and reinsurance transactions on a gross basis, so that the extent and effectiveness of the reinsurance arrangements are apparent to the users of the financial statements, and an indication of the insurer’s risk management performance is provided to users. The gross amount of premiums earned by the cedant during the reporting period is recognised as income because it undertakes to indemnify the full amount of the specified losses of those it has insured, regardless of the reinsurance arrangements. Correspondingly, the cedant recognises the gross amount of claims expense in the reporting period because it is obliged to meet the full cost of successful claims by those it has insured.\n\n10.1.3 Accordingly, premium ceded to reinsurers is recognised in the statement of comprehensive income as an expense of the cedant on the basis that it is an outgoing incurred in undertaking the business of direct insurance underwriting, and is not to be netted off against premium revenue.\n\n10.1.4 Outwards reinsurance expense is recognised in the statement of comprehensive income consistently with the recognition of reinsurance recoveries under the reinsurance contract. For proportional reinsurance the estimate of outwards reinsurance expense is based upon the gross premium of the underlying direct insurance contract. For non-proportional reinsurance the cedant estimates the total claims that are likely to be made under the contract and hence whether it needs to recognise additional outwards reinsurance expense under a minimum and deposit arrangement or whether it needs to recognise reinstatement premiums expense.\n\n10.1.5 Some reinsurance contracts purchased by a cedant might involve an experience account. Whilst these contracts may require annual renewal, in substance, the contract period is likely to be greater than one year. In estimating the outwards reinsurance expense and reinsurance recoveries to be recognised in the reporting period the cedant considers the probability-weighted expected cash flows over the expected period of indemnity and discounts the cash flows to reflect the time value of money. In determining the discount rates to be adopted, an insurer applies the same principles that are used to determine the discount rates for outstanding claims liabilities outlined in section 6. In considering all expected cash flows the reinsurer considers any profit commissions and commission rebates.\n\n","sortOrder":9},{"sectionNumber":"11","sectionType":"section","heading":"Reinsurance Recoveries and Non-reinsurance Recoveries","content":"11 Reinsurance Recoveries and Non-reinsurance Recoveries\n\n11.1 Reinsurance recoveries received or receivable in relation to the outstanding claims liability and non-reinsurance recoveries received or receivable shall be recognised as income of the cedant and shall not be netted off against the claims expense or outwards reinsurance expense in the statement of comprehensive income, or the outstanding claims liability or unearned premium liability in the statement of financial position.\n\n11.1.1 The reinsurance recoveries receivable in the statement of financial position may not be received for some time. The reinsurance recoveries receivable are discounted on a basis consistent with the discounting of the outstanding claims liabilities outlined in section 6.\n\n11.1.2 An insurer may also be entitled to non-reinsurance recoveries under the insurance contract such as salvage, subrogation and sharing arrangements with other insurers. Non-reinsurance recoveries are not offset against gross claims, but are recognised as income or assets, in the same way as, but separately from, reinsurance recoveries. The non-reinsurance recoveries receivable in the statement of financial position may not be received for some time. The non-reinsurance recoveries receivable are discounted on a basis consistent with the discounting of the outstanding claims liabilities outlined in section 6.\n\n11.1.3 Amounts that reduce the liability to the policyholder, such as excesses or allowances for contributory negligence, are not non-reinsurance recoveries and are offset against the gross claims.\n\n","sortOrder":10},{"sectionNumber":"12","sectionType":"section","heading":"Impairment of Reinsurance Assets","content":"12 Impairment of Reinsurance Assets\n\n12.1.1 If a cedant’s reinsurance asset is impaired, the cedant shall reduce its carrying amount accordingly and recognise that impairment in the statement of comprehensive income. A reinsurance asset is impaired if, and only if:\n\n(a) there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the cedant may not receive amounts due to it under the terms of the contract; and\n\n(b) that event has a reliably measurable impact on the amounts that the cedant will receive from the reinsurer.\n\n","sortOrder":11},{"sectionNumber":"13","sectionType":"section","heading":"Portfolio Transfers and Business Combinations","content":"13 Portfolio Transfers and Business Combinations\n\n13.1 Where the responsibility in relation to claims on transferred insurance business remains with the transferring insurer, the transfer shall be treated by the transferring insurer and the accepting insurer as reinsurance business.\n\n13.1.1 Portfolio transfer is a term used to describe the process by which premiums and claims are transferred from one insurer to another. Transfers may be completed in a number of ways in relation to claims arising from events that occurred before the transfer. The receiving insurer may take responsibility in relation to all claims under the agreement or treaty that have not yet been paid, or it may take responsibility only in relation to those claims arising from events that occur after the date of transfer.\n\n13.1.2 In relation to the transfer of insurance business, while the acquiring insurer agrees to meet the claims of those insured from a particular time, the contractual responsibility of the original insurer to meet those claims normally remains.\n\n13.1.3 In relation to the withdrawal of a reinsurer from a reinsurance treaty arrangement, the contractual responsibility of the reinsurer to the direct insurer in relation to outstanding claims may be passed back to the direct insurer with a return of any premium relating to unexpired risk, or may be retained by the withdrawing reinsurer. In the former case, the direct insurer may choose to reinsure the outstanding claims with another reinsurer. This assuming reinsurer would be ceded premium for bearing liability in relation to existing outstanding claims.\n\n13.1.4 Where the responsibility in relation to claims on transferred insurance business remains with the transferring insurer:\n\n(a) the transferring insurer recognises the transferred premium revenue and the relevant outstanding claims in the same way as other outwards reinsurance business; and\n\n(b) the accepting insurer recognises the premium revenue ceded to it and the relevant outstanding claims in the same way as other inwards reinsurance business.\n\n13.2 Where the responsibility in relation to claims on transferred insurance business passes from the transferring insurer to the accepting insurer, the transfer shall be accounted for as a portfolio withdrawal by the transferring insurer and as a portfolio assumption by the accepting insurer.\n\n13.3 A portfolio withdrawal shall be accounted for by the transferring insurer by eliminating the liabilities and assets connected with the risks transferred. A portfolio assumption shall be accounted for by the accepting insurer by recognising the relevant amount of unexpired premium revenue and the outstanding claims for which the transferring insurer is no longer responsible.\n\n13.3.1 To comply with AASB 3, an insurer shall, at the acquisition date, measure at fair value the insurance liabilities assumed and insurance assets acquired in a business combination. However, an insurer is permitted, but not required, to use an expanded presentation that splits the fair value of acquired insurance contracts into two components:\n\n(a) a liability measured in accordance with the insurer’s accounting policies for general insurance contracts that it issues; and\n\n(b) an intangible asset, representing the difference between:\n\n(i) the fair value of the contractual insurance rights acquired and insurance obligations assumed; and\n\n(ii) the amount described in paragraph 13.3.1(a).\n\nThe subsequent measurement of this asset shall be consistent with the measurement of the related insurance liability.\n\n13.3.2 An insurer acquiring a portfolio of general insurance contracts may use an expanded presentation described in paragraph 13.3.1.\n\n13.3.3 The intangible assets described in paragraphs 13.3.1 and 13.3.2 are excluded from the scope of AASB 136 and from the scope of AASB 138 in respect of recognition and measurement. AASB 136 and AASB 138 apply to customer lists and customer relationships reflecting the expectation of future contracts that are not part of the contractual insurance rights and contractual insurance obligations that existed at the date of a business combination or portfolio transfer.\n\n13.3.4 AASB 138 includes specific disclosure requirements in relation to this intangible asset.\n\n","sortOrder":12},{"sectionNumber":"14","sectionType":"section","heading":"Underwriting Pools and Coinsurance","content":"14 Underwriting Pools and Coinsurance\n\n14.1 Insurance business allocated through underwriting pools and coinsurance arrangements, by an entity acting as agent, shall be accounted for by the accepting insurer as direct insurance business.\n\n14.1.1 Direct insurers or reinsurers may form underwriting pools or enter coinsurance arrangements as vehicles for jointly insuring particular risks or types of risks. Premiums, claims and other expenses are usually shared in agreed ratios by insurers involved in these arrangements.\n\n14.1.2 Many underwriting pools and coinsurance arrangements involve the acceptance of risks by an entity acting as an agent for pool members or coinsurers. The entity receives premiums and pays claims and expenses, and allocates shares of the business to each pool member or coinsurer in agreed ratios. As the entity acting as agent is not an insurer, the business allocated to pool members and coinsurers is not reinsurance business. Pool members and coinsurers treat such business allocated to them as direct insurance business.\n\n14.2 Business directly underwritten by a member of an underwriting pool or coinsurance arrangement shall be treated as direct insurance business and the portion of the risk reinsured by other pool members or coinsurers, determined by reference to the extent of the shares in the pool or arrangement of other pool members or coinsurers, shall be treated as outwards reinsurance. The pool member’s or coinsurer’s share of insurance business that other insurers place in the pool or arrangement shall be treated as inwards reinsurance.\n\n","sortOrder":13},{"sectionNumber":"15","sectionType":"section","heading":"Assets Backing General Insurance Liabilities","content":"15 Assets Backing General Insurance Liabilities\n\nFair Value Approach\n\n15.1.1 Paragraphs 15.2 to 15.5 address the measurement of certain assets backing general insurance liabilities or financial liabilities that arise under non-insurance contracts. The fair value approach to the measurement of assets backing general insurance liabilities or financial liabilities that arise under non-insurance contracts is consistent with the present value measurement approach for general insurance liabilities, and the fair value measurement for financial liabilities that arise under non-insurance contracts, required by this Standard. Where assets are not backing general insurance liabilities or financial liabilities that arise under non-insurance contracts, general insurers apply the applicable accounting standards making use of any measurement choices available.\n\nMeasurement\n\n15.2 Financial assets that:\n\n(a) are within the scope of AASB 9;\n\n(b) back general insurance liabilities; and\n\n(c) are permitted to be designated as “at fair value through profit or loss” under AASB 9;\n\nshall be designated as “at fair value through profit or loss” under AASB 9 on first application of this Standard, or on initial recognition.\n\n15.2.1 An insurer applies AASB 9 to its financial assets. Under AASB 9 a financial asset is classified and measured at fair value through profit or loss when:\n\n(a) it does not meet the criteria specified in paragraph 4.1.2 of AASB 9 to be classified at amortised cost; or\n\n(b) it does not meet the criteria specified in paragraph 4.1.2A of AASB 9 to be classified at fair value through other comprehensive income; or\n\n(c) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.1.5 of AASB 9.\n\nAASB 1 First-time Adoption of Australian Accounting Standards permits entities to designate financial assets as “at fair value through profit or loss” on first application of the Standard.\n\n15.2.2 The view adopted in this Standard is that financial assets, within the scope of AASB 9 that back general insurance liabilities, are permitted to be measured at fair value through profit or loss under AASB 9. This is because the measurement of general insurance liabilities under this Standard incorporates current information and measuring the financial assets backing these general insurance liabilities at fair value, eliminates or significantly reduces a potential measurement or recognition inconsistency which would arise if the assets were classified and measured at amortised cost or fair value through other comprehensive income (refer to AASB 9 paragraph B4.1.30(a)).\n\n15.3 Investment property within the scope of AASB 140 Investment Property and that backs general insurance liabilities shall be measured using the fair value model under AASB 140 and AASB 13 Fair Value Measurement.\n\n15.4 Property, plant and equipment that is within the scope of AASB 116 Property, Plant and Equipment and that backs general insurance liabilities, shall be measured using the revaluation model under AASB 116.\n\n15.4.1-15.4.2 \\[Deleted by the AASB\\]\n\n15.5 When preparing separate financial statements, those investments in subsidiaries, joint ventures and associates that:\n\n(a) are defined by AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements and AASB 128 Investments in Associates and Joint Ventures;\n\n(b) back general insurance liabilities; and\n\n(c) are permitted to be designated as “at fair value through profit or loss” under AASB 9;\n\nshall be designated as “at fair value through profit or loss” under AASB 9, on first application of this Standard or on initial recognition.\n\n15.5.1 An insurer applies AASB 127 to its investments in subsidiaries, joint ventures and associates when preparing separate financial statements. Under AASB 127, in the parent’s own financial statements, the investments in subsidiaries, joint ventures and associates can either be accounted for at cost or in accordance with AASB 9.\n\n15.5.2 In the parent’s separate financial statements, investments in subsidiaries, joint ventures and associates that are within the scope of AASB 127, that the insurer considers back general insurance liabilities, and that are permitted to be designated as “at fair value through profit or loss” under AASB 9, are designated as “at fair value through profit or loss” under AASB 9, on first application of this Standard or on initial recognition.\n\n","sortOrder":14},{"sectionNumber":"16","sectionType":"section","heading":"Non-insurance Contracts Regulated under the Insurance Act 1973","content":"16 Non-insurance Contracts Regulated under the Insurance Act 1973\n\n16.1 Non-insurance contracts regulated under the Insurance Act 1973 shall be treated under AASB 9 to the extent that they give rise to financial assets or financial liabilities respectively. However, the financial assets and the financial liabilities that arise under these contracts shall be designated as “at fair value through profit or loss”, on first application of this Standard, or on initial recognition of the financial assets or financial liabilities, where this is permitted under AASB 9.\n\n16.1.1 In relation to non-insurance contracts regulated under the Insurance Act, an insurer applies AASB 9 to its financial assets and financial liabilities.\n\n16.1.2 Under AASB 9 a financial asset is classified and measured at fair value through profit or loss when:\n\n(a) it does not meet the criteria specified in paragraph 4.1.2 of AASB 9 to be classified at amortised cost; or\n\n(b) it does not meet the criteria specified in paragraph 4.1.2A of AASB 9 to be classified at fair value through other comprehensive income; or\n\n(c) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.1.5 of AASB 9.\n\nAASB 1 First-time Adoption of Australian Accounting Standards permits entities to designate financial assets as “at fair value through profit or loss” on first application of the Standard.\n\n16.1.3 Under AASB 9 a financial liability at fair value through profit or loss is a financial liability that meets either of the following conditions:\n\n(a) it meets the definition of held for trading; or\n\n(b) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.2.2, because either:\n\n(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or\n\n(ii) a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.\n\nAn entity may also use this designation when it is a contract with an embedded derivative and paragraph 4.3.3 of AASB 9 allows the entity to measure the hybrid contract as “at fair value through profit or loss”.\n\nAASB 1 First-time Adoption of Australian Accounting Standards permits entities to designate financial liabilities as “at fair value through profit or loss” on first application of the Standard.\n\n16.2 Paragraphs 15.2, 15.3, 15.4 and 15.5 shall also be applied to the measurement of assets that back financial liabilities that arise under non-insurance contracts.\n\n","sortOrder":15},{"sectionNumber":"17","sectionType":"section","heading":"Disclosures","content":"17 Disclosures\n\nStatement of Comprehensive Income\n\n17.1 In relation to the statement of comprehensive income, the financial statements shall disclose:\n\n(a) the underwriting result for the reporting period, determined as the amount obtained by deducting the sum of claims expense, outwards reinsurance premium expense and underwriting expenses from the sum of direct and inwards reinsurance premium revenues and recoveries revenue;\n\n(b) net claims incurred shall be disclosed, showing separately:\n\n(i) the amount relating to risks borne in the current reporting period; and\n\n(ii) the amount relating to a reassessment of risks borne in all previous reporting periods.\n\nAn explanation shall be provided where net claims incurred relating to a reassessment of risks borne in previous reporting periods are material; and\n\n(c) in respect of 17.1(b)(i) and 17.1(b)(ii), the following components shall be separately disclosed:\n\n(i) gross claims incurred – undiscounted;\n\n(ii) reinsurance and other recoveries – undiscounted; and\n\n(iii) discount movements shown separately for (i) and (ii).\n\n17.1.1 This Standard requires the underwriting result for the reporting period to be disclosed. This disclosure gives an indication of an insurer’s underwriting performance, including the extent to which underwriting activities rely on investment income for the payment of claims.\n\n17.1.2 Based on the total movement in net claims incurred, it may appear that there has not been a material reassessment of risks borne in previous periods, however, there may be material movements at a business segment level, that mitigate each other. For example, the insurer may have seen a material deterioration in its motor portfolio, which has been mitigated by material savings in the professional indemnity portfolio, such that when both portfolios are aggregated there appears to have been little change in the reporting period. In such circumstances, the insurer provides an explanation of the reassessments that took place in the net claims incurred for previous periods during the reporting period at the business segment level.\n\nStatement of Financial Position\n\n17.2 The financial statements shall disclose in relation to the outstanding claims liability:\n\n(a) the central estimate of the expected present value of future payments for claims incurred;\n\n(b) the component related to the risk margin;\n\n(c) the percentage risk margin adopted in determining the outstanding claims liability (determined from (a) and (b) above);\n\n(d) the probability of adequacy intended to be achieved through adoption of the risk margin; and\n\n(e) the process used to determine the risk margin, including the way in which diversification of risks has been allowed for.\n\n17.3 An insurer shall disclose the process used to determine which assets back general insurance liabilities and which assets back financial liabilities arising under non-insurance contracts.\n\nNon-insurance Contracts\n\n17.4 Where a general insurer has issued a non-insurance contract or holds a non-insurance contract as a cedant, and that non-insurance contract has a material financial impact on the statement of comprehensive income, statement of financial position or cash flows, the general insurer shall disclose:\n\n(a) the nature of the non-insurance contract;\n\n(b) the recognised assets, liabilities, income, expense and cash flows arising from the non-insurance contract; and\n\n(c) information that helps users to understand the amount, timing and uncertainty of future cash flows from the non-insurance contract.\n\n17.4.1 In applying paragraph 17.4 a non-insurance contract shall be considered together with any related contracts or side letters, when determining the need for disclosure, and in making the disclosures required.\n\n17.5 \\[Deleted by the AASB\\]\n\n17.5.1 \\[Deleted by the AASB\\]\n\nInsurance Contracts – Explanation of Recognised Amounts\n\n17.6 An insurer shall disclose information that identifies and explains the amounts in its financial statements arising from insurance contracts.\n\n17.6.1 To comply with paragraph 17.6, an insurer shall disclose:\n\n(a) its accounting policies for insurance contracts and related assets, liabilities, income and expense;\n\n(b) the recognised assets, liabilities, income, expense and cash flows arising from insurance contracts. Furthermore, if the insurer is a cedant, it shall disclose:\n\n(i) gains and losses recognised in the statement of comprehensive income on buying reinsurance; and\n\n(ii) if the cedant defers and amortises gains and losses arising on buying reinsurance, the amortisation for the period and the amounts remaining unamortised at the beginning and end of the period;\n\n(c) the process used to determine the assumptions that have the greatest effect on the measurement of the recognised amounts described in (b). When practicable, an insurer shall also give quantified disclosure of those assumptions;\n\n(d) the effect of changes in assumptions used to measure insurance assets and insurance liabilities, showing separately the effect of each change that has a material effect on the financial statements; and\n\n(e) reconciliations of changes in insurance liabilities, reinsurance assets and, if any, related deferred acquisition costs.\n\n17.6.2 In applying paragraph 17.6.1(b), the recognised assets and liabilities arising from insurance contracts would normally include:\n\n(a) gross outstanding claims liability;\n\n(b) reinsurance recoveries receivable arising from the outstanding claims liability;\n\n(c) gross unearned premium liability;\n\n(d) reinsurance recoveries receivable arising from the unearned premium liability;\n\n(e) unexpired risk liability;\n\n(f) other reinsurance recoveries receivable;\n\n(g) other recoveries receivable;\n\n(h) outwards reinsurance expense asset or liability;\n\n(i) direct premium revenue receivable;\n\n(j) inwards reinsurance premium revenue receivable;\n\n(k) deferred acquisition cost asset; and\n\n(l) intangible assets relating to acquired insurance contracts.\n\n17.6.3 In applying paragraph 17.6.1(b), the recognised income and expenses arising from insurance contracts would normally include:\n\n(a) direct premium revenue;\n\n(b) inwards reinsurance premium revenue (including retrocessions);\n\n(c) reinsurance and other recoveries revenue;\n\n(d) direct claims expense;\n\n(e) reinsurance claims expense;\n\n(f) outwards reinsurance premium expense (including retrocessions);\n\n(g) acquisition costs expense; and\n\n(h) other underwriting expenses, including claims handling expenses.\n\n17.6.4 When an insurer is presenting the disclosures required by paragraphs 17.6.1(c) and 17.6.1(d) the insurer determines the level and extent of disclosure that is appropriate having regard to its circumstances and the qualitative characteristics of financial statements under the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).\n\n    AusCF17.6.4 Notwithstanding paragraph 17.6.4, in respect of AusCF entities, when an insurer is presenting the disclosures required by paragraphs 17.6.1(c) and 17.6.1(d) the insurer determines the level and extent of disclosure that is appropriate having regard to its circumstances and the qualitative characteristics of financial statements under the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards).\n\n17.6.5 For an insurer that is involved in a large number of insurance classes, across different jurisdictions, disclosure by class of business is likely to be voluminous and may not be understandable to the user of the financial statements. Furthermore, for such an insurer, disclosure for the entity as a whole is also likely to be at too high a level of aggregation to be relevant or comparable. It is expected that for most insurers disclosure at the major business segment level would normally be most appropriate. The insurer may believe that disclosure of a range of values would be relevant to the users of the financial statements.\n\n17.6.6 Some of the assumptions that would normally have the greatest effect on the measurement of the recognised amounts described in paragraph 17.6.1(b), are discount rates, inflation rates, average weighted term to settlement from the claims reporting date, average claim frequency, average claim size and expense rates. The insurer determines whether these assumptions shall be disclosed given the requirements of paragraphs 17.6 and 17.6.1.\n\nNature and Extent of Risks Arising from Insurance Contracts\n\n17.7 An insurer shall disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from insurance contracts.\n\n17.7.1 To comply with paragraph 17.7, an insurer shall disclose:\n\n(a) its objectives, policies and processes for managing risks arising from insurance contracts and the methods used to manage those risks;\n\n(b) information about insurance risk (both before and after risk mitigation by reinsurance), including information about:\n\n(i) sensitivity to insurance risk (see paragraph 17.7.5);\n\n(ii) concentrations of insurance risk, including a description of how management determines concentrations and a description of the shared characteristic that identifies each concentration (e.g. type of insured event, geographical area, or currency); and\n\n(iii) actual claims compared with previous estimates (i.e. claims development). The disclosure about claims development shall go back to the period when the earliest material claim arose for which there is still uncertainty about the amount and timing of the claims payments, but need not go back more than ten years. An insurer need not disclose this information for claims for which uncertainty about the amount and timing of claims payments is typically resolved within one year;\n\n(c) information about credit risk, liquidity risk and market risk that paragraphs 31-42 of AASB 7 Financial Instruments: Disclosures would require if the insurance contracts were within the scope of AASB 7. However:\n\n(i) an insurer need not provide the maturity analyses required by paragraphs 39(a) and (b) of AASB 7 if it discloses information about the estimated timing of the net cash outflows resulting from recognised insurance liabilities instead. This may take the form of an analysis, by estimated timing, of the amounts recognised in the statement of financial position; and\n\n(ii) if an insurer uses an alternative method to manage sensitivity to market conditions, such as an embedded value analysis, it may use that sensitivity analysis to meet the requirement in paragraph 40(a) of AASB 7. Such an insurer shall also provide the disclosures required by paragraph 41 of AASB 7; and\n\n(d) information about exposures to market risk arising from embedded derivatives contained in a host insurance contract if the insurer is not required to, and does not, measure the embedded derivatives at fair value.\n\n17.7.2 For an insurer that is involved in a large number of insurance classes, across different jurisdictions, disclosure by class of business is likely to be voluminous and may not be understandable to the user of the financial statements. Furthermore, for such an insurer disclosure for the entity as a whole would normally be at too high a level of aggregation to be relevant or comparable. It is expected that for most insurers disclosure at the major business segment level would normally be most appropriate.\n\n17.7.3 The claims development disclosure required by paragraph 17.7.1(b)(iii) only applies to classes of business where claims are not typically resolved within one year. The insurer, in disclosing claims development, ensures it is clear to the reader of the financial statements, which classes of business, or which segments of the business, are covered by the disclosures and which classes of business, or which segments of the business, are not covered by the disclosures.\n\n17.7.4 IG Example 5 in the Guidance on Implementing IFRS 4 Insurance Contracts, provides one possible format to meet the claims development disclosure requirements of this Standard. Such a format may be particularly appropriate for longer tail classes of business where the long tail nature of the claims is a significant aspect in the development of the claims, as this format illustrates the development of claims over a number of years. If this format is adopted, disclosure by accident year, gross and net of reinsurance, of undiscounted claims would normally be most relevant to the users of financial statements. The insurer explains the information presented. This includes whether the claims are discounted or undiscounted, gross or net of reinsurance and by accident year or underwriting year.\n\n17.7.5 To comply with paragraph 17.7.1(b)(i), an insurer shall disclose either (a) or (b) as follows:\n\n(a) a sensitivity analysis that shows how profit or loss and equity would have been affected had changes in the relevant risk variable that were reasonably possible at the end of the reporting period occurred; the methods and assumptions used in preparing the sensitivity analysis; and any changes from the previous period in the methods and assumptions used. However, if an insurer uses an alternative method to manage sensitivity to market conditions, such as an embedded value analysis, it may meet this requirement by disclosing that alternative sensitivity analysis and the disclosures required by paragraph 41 of AASB 7; and\n\n(b) qualitative information about sensitivity, and information about those terms and conditions of insurance contracts that have a material effect on the amount, timing and uncertainty of the insurer’s future cash flows.\n\nLiability Adequacy Test\n\n17.8 In relation to the liability adequacy test in section 9, the financial statements shall disclose:\n\n(a) where a deficiency has been identified, the amounts underlying the calculation performed, that is:\n\n(i) unearned premium liability;\n\n(ii) related reinsurance asset;\n\n(iii) deferred acquisition costs;\n\n(iv) intangible assets;\n\n(v) present value of expected future cash flows for future claims, showing expected reinsurance recoveries separately; and\n\n(vi) deficiency;\n\n(b) any write-down of deferred acquisition costs under the liability adequacy test;\n\n(c) any write-down of intangible assets under the liability adequacy test;\n\n(d) in relation to the present value of expected future cash flows for future claims:\n\n(i) the central estimate of the present value of expected future cash flows;\n\n(ii) the component of present value of expected future cash flows related to the risk margin;\n\n(iii) the percentage risk margin adopted in determining the present value of expected future cash flows (determined from (i) and (ii) above);\n\n(iv) the probability of adequacy intended to be achieved through adoption of the risk margin; and\n\n(v) the process used to determine the risk margin, including the way in which diversification of risks has been allowed for;\n\n(e) where the probability of adequacy disclosed in paragraph 17.2(d) is not the same or similar to the probability of adequacy disclosed in paragraph 17.8(d)(iv), the reasons for the difference; and\n\n(f) where a surplus has been identified, the fact that the liability adequacy test identified a surplus.\n\nOther Disclosures\n\n17.9.1 This Standard addresses disclosure requirements in relation to general insurance contracts. Other Australian Accounting Standards may be relevant to a general insurer’s financial statements. In particular, the disclosure requirements in AASB 7 would normally be relevant to general insurers.\n\n","sortOrder":16},{"sectionNumber":"18","sectionType":"section","heading":"Transitional Provisions","content":"18 Transitional Provisions\n\n18.1 An entity need not apply the disclosure requirements in this Standard to comparative information that relates to annual periods beginning before 1 January 2005, except for the disclosures required by paragraphs 17.6.1(a) and 17.6.1(b) about accounting policies, and recognised assets, liabilities, income and expense and cash flows.\n\n18.2 Where an entity applies the disclosure requirements in this Standard to comparative information that relates to annual periods beginning before 1 January 2005, if it is impracticable to apply a particular requirement of this Standard to comparative information that relates to annual periods beginning before 1 January 2005, an entity shall disclose that fact. AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors explains the term “impracticable”.\n\n18.3 In applying paragraph 17.7.1(b)(iii), an entity need not disclose information about claims development that occurred earlier than five years before the end of the first annual reporting period in which it applies this Standard. Furthermore, if it is impracticable, when an entity first applies this Standard, to prepare information about claims development that occurred before the beginning of the earliest period for which an entity presents full comparative information that complies with this Standard, the entity shall disclose that fact.\n\n18.3.1 There are also references to transitional measurement requirements in paragraphs 15.2.1, 15.2.2, 15.5, 15.5.2, 16.1 and 16.1.1.\n\n18.4 \\[Deleted by the AASB\\]\n\n18.5 \\[Deleted by the AASB\\]\n\n","sortOrder":17},{"sectionNumber":"19","sectionType":"section","heading":"Definitions","content":"19 Definitions\n\n19.1 In this Standard:\n\nattachment date means, for a direct insurer, the date as from which the insurer accepts risk from the insured under an insurance contract or endorsement or, for a reinsurer, the date from which the reinsurer accepts risk from the direct insurer or another reinsurer under a reinsurance arrangement\n\ncedant means the policyholder under a reinsurance contract\n\nclaim means a demand by any party external to the entity for payment by the insurer on account of an alleged loss resulting from an insured event or events, that have occurred, alleged to be covered by an insurance contract\n\nclaims expense means the charge to the statement of comprehensive income for the reporting period and represents the sum of claims settled and claims management expenses relating to claims incurred in the period and the movement in the gross outstanding claims liability in the period\n\nclaims incurred means claims that have occurred prior to the end of the reporting period, whether reported or unreported at the end of the reporting period\n\ndeposit component means a contractual component that is not accounted for as a derivative under AASB 9 Financial Instruments and would be within the scope of AASB 9 if it were a separate instrument\n\ndeposit premium means the premium charged by the insurer at the inception of a contract under which the final premium depends on conditions prevailing over the contract period and so is not determined until the expiry of that period\n\ndirect insurance contract means an insurance contract that is not a reinsurance contract\n\nfair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See AASB 13.)\n\nfinancial risk means the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract\n\nfuture claims means claims in respect of insured events that are expected to occur in future reporting periods under policies where the attachment date is prior to the end of the reporting period\n\ngeneral insurance contract means an insurance contract that is not a life insurance contract\n\ngeneral insurer means an insurer that writes general insurance contracts\n\ngeneral reinsurance contract means a reinsurance contract that is not a life reinsurance contract\n\ninsurance asset means an insurer’s net contractual rights under an insurance contract\n\ninsurance contract means a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder\n\n(Refer to Appendix for additional guidance in applying this definition.)\n\ninsurance liability means an insurer’s net contractual obligations under an insurance contract\n\ninsurance risk means risk, other than financial risk, transferred from the holder of a contract to the issuer\n\ninsured event means an uncertain future event covered by an insurance contract and creates insurance risk\n\ninsurer means the party that has an obligation under an insurance contract to compensate a policyholder if an insured event occurs\n\ninwards reinsurance means reinsurance contracts written by reinsurers\n\nliability adequacy test means an assessment of whether the carrying amount of an insurance liability needs to be increased (or the carrying amount of the related deferred acquisition costs or related intangible assets decreased) based on a review of future cash flows\n\nlife insurance contract means an insurance contract, or a financial instrument with a discretionary participation feature, regulated under the Life Insurance Act 1995, and similar contracts issued by entities operating outside Australia\n\nlife reinsurance contract means a life insurance contract issued by one insurer (the reinsurer) to compensate another insurer (the cedant) for losses on one or more contracts issued by the cedant\n\nnet claims incurred means direct claims costs net of reinsurance and other recoveries, and indirect claims handling costs, determined on a discounted basis\n\nnon-insurance contract means a contract regulated under the Insurance Act 1973, and similar contracts issued by entities operating outside Australia, which fails to meet the definition of an insurance contract under this Standard\n\n(An example of a non-insurance contract might be a type of complex financial reinsurance contract.)\n\noutstanding claims liability means all unpaid claims and related claims handling expenses relating to claims incurred prior to the end of the reporting period\n\npolicyholder means a party that has a right to compensation under an insurance contract if an insured event occurs\n\npremium means the amount charged in relation to accepting risk from the insured, but does not include amounts collected on behalf of third parties\n\nreinsurance assets means a cedant’s net contractual rights under a reinsurance contract\n\nreinsurance contract means an insurance contract issued by one insurer (the reinsurer) to compensate another insurer (the cedant) for losses on one or more contracts issued by the cedant\n\nreinsurer means the party that has an obligation under a reinsurance contract to compensate a cedant if an insured event occurs\n\nseparate financial statements are those presented by a parent, an investor in an associate or a venturer in a joint venture, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees\n\nunbundle means to treat the components of a contract as if they were separate contracts\n\nweather derivative means a contract that requires payment based on climatic, geological or other physical variables\n\n19.2 The following terms are defined in AASB 9 or AASB 132 and are used in this Standard with the meaning specified in those Standards:\n\n(a) financial asset;\n\n(b) financial guarantee contract;\n\n(c) financial instrument; and\n\n(d) financial liability.\n\n## Accounting Standard AASB 1023 General In Accounting Standard AASB 1023 General Insurance Contracts (as amended)\n\n## Accounting Standard AASB 1023 General Insurance Contracts (as amended)\n\nThis compiled Standard applies to annual reporting periods beginning on or after 1 January 2023 but before 1 July 2026. It takes into account amendments up to and including 15 December 2022 and was prepared on 6 February 2023 by the staff of the Australian Accounting Standards Board (AASB).\n\nThis compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 1023 (July 2004) as amended by other Accounting Standards, which are listed in the table below.\n\nTable of Standards\n\n| Standard     | Date made   | FRL identifier | Commence-ment date | Effective date(annual periods… on or after …)        | Application, saving or transitional provisions |\n| ------------ | ----------- | -------------- | ------------------ | ---------------------------------------------------- | ---------------------------------------------- |\n| AASB 1023    | 15 Jul 2004 | F2005B01401    | 24 May 2005        | (beginning) 1 Jan 2005                               |                                               |\n| AASB 2005-2  | 3 Jun 2005  | F2005L01699    | 30 Jun 2005        | (beginning) 1 Jan 2005                               |                                               |\n| AASB 2005-4  | 9 Jun 2005  | F2005L01708    | 30 Jun 2005        | (beginning) 1 Jan 2006                               | see (a) below                                  |\n| AASB 2005-9  | 6 Sep 2005  | F2005L03009    | 7 Oct 2005         | (beginning) 1 Jan 2006                               | see (a) below                                  |\n| AASB 2005-10 | 5 Sep 2005  | F2005L02840    | 27 Sep 2005        | (beginning) 1 Jan 2007                               | see (b) below                                  |\n| AASB 2005-12 | 8 Dec 2005  | F2005L04207    | 24 Dec 2005        | (ending) 31 Dec 2005                                 | see (c) below                                  |\n| AASB 2007-3  | 26 Feb 2007 | F2007L00551    | 8 Mar 2007         | (beginning) 1 Jan 2009                               | see (d) below                                  |\n| AASB 2007-4  | 30 Apr 2007 | F2007L01669    | 16 Jun 2007        | (beginning) 1 Jul 2007                               | see (e) below                                  |\n| AASB 2007-8  | 24 Sep 2007 | F2007L04130    | 26 Oct 2007        | (beginning) 1 Jan 2009                               | see (f) below                                  |\n| AASB 2007-10 | 13 Dec 2007 | F2008L04269    | 29 Oct 2008        | (beginning) 1 Jan 2009                               | see (f) below                                  |\n| AASB 2008-5  | 24 Jul 2008 | F2008L03030    | 16 Aug 2008        | (beginning) 1 Jan 2009                               | see (g) below                                  |\n| AASB 2009-2  | 22 Apr 2009 | F2009L01638    | 9 May 2009         | (beginning) 1 Jan 2009and (ending) 30 Apr 2009       | see (h) below                                  |\n| AASB 2009-6  | 25 Jun 2009 | F2009L02729    | 17 Jul 2009        | (beginning) 1 Jan 2009and (ending) 30 Jun 2009       | see (i) below                                  |\n| Erratum      | 5 Oct 2009  |                |                    | (beginning) 1 Jan 2009and (ending) 30 Jun 2009       | see (j) below                                  |\n| AASB 2009-11 | 7 Dec 2009  | F2009L04690    | 23 Dec 2009        | (beginning) 1 Jan 2018                               | see (k) below                                  |\n| AASB 2009-12 | 15 Dec 2009 | F2009L04669    | 23 Dec 2009        | (beginning) 1 Jan 2011                               | see (l) below                                  |\n| AASB 2010-5  | 27 Oct 2010 | F2010L03081    | 25 Nov 2010        | (beginning) 1 Jan 2011                               | see (l) below                                  |\n| AASB 2010-7  | 6 Dec 2010  | F2011L00315    | 1 Mar 2011         | (beginning) 1 Jan 2018                               | see (m) below                                  |\n| AASB 2011-7  | 29 Aug 2011 | F2011L02017    | 5 Oct 2011         | (beginning) 1 Jan 2013                               | see (n) below                                  |\n| AASB 2011-8  | 2 Sep 2011  | F2011L02038    | 8 Oct 2011         | (beginning) 1 Jan 2013                               | see (o) below                                  |\n| AASB 2012-10 | 18 Dec 2012 | F2013L00080    | 23 Jan 2013        | (beginning) 1 Jan 2013                               | see (p) below                                  |\n| AASB 2013-9  | 20 Dec 2013 | F2014L00370    | 1 Apr 2014         | Pt A (ending) 20 Dec 2013Pt B (beginning) 1 Jan 2014 | see (q) belowsee (r) below                     |\n| AASB 2014-5  | 12 Dec 2014 | F2015L00107    | 12 Dec 2014        | (beginning) 1 Jan 2018                               | see (s) below                                  |\n| AASB 2014-7  | 17 Dec 2014 | F2015L00135    | 17 Dec 2014        | (beginning) 1 Jan 2018                               | see (t) below                                  |\n| AASB 2015-8  | 22 Oct 2015 | F2015L01840    | 31 Dec 2016        | (beginning) 1 Jan 2017                               | see (u) below                                  |\n| AASB 16      | 23 Feb 2016 | F2016L00233    | 31 Dec 2018        | (beginning) 1 Jan 2019                               | see (v) below                                  |\n| AASB 2016-7  | 9 Dec 2016  | F2017L00043    | 31 Dec 2016        | (beginning) 1 Jan 2017                               | see (w) below                                  |\n| AASB 17      | 19 Jul 2017 | F2017L01184    | 31 Dec 2022        | (beginning) 1 Jan 2023                               | see (x) below                                  |\n| AASB 2017-5  | 12 Dec 2017 | F2018L00067    | 31 Dec 2017        | (beginning) 1 Jan 2018                               | see (y) below                                  |\n| AASB 2019-1  | 21 May 2019 | F2019L00966    | 31 Dec 2019        | (beginning) 1 Jan 2020                               | see (z) below                                  |\n| AASB 2021-7  | 20 Dec 2021 | F2021L01883    | 31 Dec 2021        | (beginning) 1 Jan 2022                               | see (aa) below                                 |\n\n(a) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2006.\n\n(b) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2007.\n\n(c) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 that end before 31 December 2005.\n\n(d) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 8 Operating Segments is also applied to such periods.\n\n(e) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2007.\n\n(f) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods.\n\n(g) Entities may elect to apply this Standard, or its amendments to individual Standards, to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009.\n\n(h) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009 and to annual reporting periods beginning on or after 1 January 2009 that end before 30 April 2009.\n\n(i) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods, and to annual reporting periods beginning on or after 1 January 2009 that end before 30 June 2009.\n\n(j) Entities may elect to apply this Erratum to annual reporting periods beginning on or after 1 January 2005, provided that AASB 2009-6 Amendments to Australian Accounting Standards is also applied to such periods.\n\n(k) AASB 2009-11 has been amended by AASB 2010-10 (made 31 December 2010) and AASB 2012-6 (made 10 September 2012). AASB 2014-1 deferred the amendments set out in AASB 2009-11 to annual reporting periods beginning on or after 1 January 2018.\n\nEntities may elect to apply this Standard to annual reporting periods ending on or after 31 December 2009 that begin before 1 January 2018, provided that AASB 9 (2009) Financial Instruments is also applied to such periods.\n\n(l) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2011.\n\n(m) AASB 2010-7 has been amended by AASB 2010-10 (made 31 December 2010) and AASB 2012-6 (made 10 September 2012). AASB 2014-1 deferred the amendments set out in AASB 2010-7 to annual reporting periods beginning on or after 1 January 2018.\n\nEntities may elect to apply this Standard as set out in paragraph 6 of AASB 2010-7.\n\n(n) AASB 2011-7 has been amended by AASB 2012-6 (made 10 September 2012) and AASB 2012-10 (made 18 December 2012).\n\nFor-profit entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013. The Standard applies for not-for-profit entities to annual reporting periods beginning on or after 1 January 2014. Not-for-profit entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2013 but before 1 January 2014. If an entity elects to apply this Standard to such annual reporting periods, it shall also apply AASB 10 Consolidated Financial Statements and associated Standards to such periods.\n\n(o) AASB 2011-8 has been amended by AASB 2011-10 (made 5 September 2011) and AASB 2012-6 (made 10 September 2012).\n\nEntities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013, provided that AASB 13 Fair Value Measurement is also applied to such periods.\n\n(p) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013.\n\n(q) Entities may elect to apply Part A of this Standard to annual reporting periods beginning on or after 1 January 2005 that end before 20 December 2013, provided that AASB CF 2013-1 Amendments to the Australian Conceptual Framework and AASB 1048 Interpretation of Standards (December 2013) are also applied to such periods.\n\n(r) Early application of Part B of this Standard is not permitted.\n\n(s) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2018, provided that AASB 15 Revenue from Contracts with Customers is also applied to such periods. AASB 2015-8 updated the application date of the amendments in this Standard (and of AASB 15) to 1 January 2018.\n\n(t) Entities may elect to apply this Standard to annual reporting periods beginning after 24 July 2014 but before 1 January 2018, provided that AASB 9 Financial Instruments (2014) is also applied to such periods.\n\n(u) The amendments made by AASB 2014-5 are no longer required to apply to annual reporting periods beginning on or after 1 January 2017 but before 1 January 2018, as a consequence of AASB 2015-8 deferring the effective date of AASB 15 (and its consequential amendments in AASB 2014-5) from 1 January 2017 to 1 January 2018.\n\n(v) Entities may elect to apply this Standard to annual periods beginning before 1 January 2019, provided that AASB 15 is also applied to the same period.\n\n(w) AASB 2016-7 deferred the effective date of AASB 15 (and its consequential amendments in AASB 2014-5) for not-for-profit entities to annual reporting periods beginning on or after 1 January 2019, instead of 1 January 2018. However, earlier application of AASB 1023 (2015) incorporating the text that relates to AASB 15 is permitted, provided that AASB 15 is also applied.\n\n(x) Entities may elect to apply this Standard to annual periods beginning before 1 January 2023, provided that AASB 9 Financial Instruments is also applied on or before the date of initial application of AASB 17. (AASB 17 was amended prior to its mandatory application by various amending Standards, including AASB 2022-8 Amendments to Australian Accounting Standards – Insurance Contracts: Consequential Amendments, made by the AASB on 15 December 2022.)\n\nAASB 17 has also been amended by AASB 2022-9 Amendments to Australian Accounting Standards – Insurance Contracts in the Public Sector (made on 15 December 2022) to supersede and repeal AASB 1023 for annual periods beginning on or after 1 July 2026.\n\n(y) Entities may elect to apply this Standard to annual periods beginning before 1 January 2018.\n\n(z) Entities may elect to apply this Standard to annual periods beginning before 1 January 2020.\n\n(aa) Entities may elect to apply this Standard to annual periods beginning before 1 January 2022.\n\nTable of amendments\n\n| Paragraph affected           | How affected                                      | By … [paragraph/page]                                                                                                       |\n| ---------------------------- | ------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- |\n| 1.1                          | amendeddeleted                                    | AASB 17 [page 82]AASB 2021-7 [39]                                                                                           |\n| AusCF1                       | added                                             | AASB 2019-1 [page 24]                                                                                                       |\n| 1.4                          | deleted                                           | AASB 2013-9B [37, 38]                                                                                                       |\n| 1.4.1                        | deleted                                           | AASB 2013-9B [40]                                                                                                           |\n| 2.2                          | amendedamendedamendedamendedamendedamended        | AASB 2005-9 [12, 25]AASB 2007-4 [104]AASB 2010-7 [57]AASB 2014-5 [41]AASB 2017-5 [27]AASB 16 [page 61]                      |\n| 2.3.1                        | amendedamended                                    | AASB 2009-11 [54]AASB 2010-7 [7, 57]                                                                                        |\n| 2.3.2                        | amended                                           | AASB 2010-7 [56]                                                                                                            |\n| 2.4.4                        | amended                                           | AASB 2010-7 [56]                                                                                                            |\n| 4.2.5                        | amended                                           | AASB 2009-12 [19]                                                                                                           |\n| 4.4.8                        | amended                                           | AASB 2009-12 [19]                                                                                                           |\n| 4.5.2                        | amendedamended                                    | AASB 2007-10 [95]AASB 2009-12 [19]                                                                                          |\n| 5.1.10                       | amended                                           | AASB 2005-2 [7]                                                                                                             |\n| 5.2.4                        | amended                                           | AASB 2009-12 [19]                                                                                                           |\n| 6.1.3                        | amended                                           | Erratum, Oct 2009 [6]                                                                                                       |\n| 9.1                          | amended                                           | AASB 2005-2 [8]                                                                                                             |\n| 9.1.1                        | deleted                                           | AASB 2005-2 [9]                                                                                                             |\n| 9.1.2                        | renumbered as 9.1.1added                          | AASB 2005-2 [10]AASB 2005-2 [11]                                                                                            |\n| 9.1.5                        | amended                                           | AASB 2005-2 [12]                                                                                                            |\n| 13.3.1                       | amended                                           | AASB 2007-4 [104]                                                                                                           |\n| 15.2                         | amendedamendedamended                             | AASB 2005-4 [21]AASB 2009-11 [53]AASB 2010-7 [7, 56]                                                                        |\n| 15.2.1                       | amendedamendedamendedamended                      | AASB 2005-4 [21]AASB 2009-11 [54]AASB 2010-7 [7, 57]AASB 2014-7 [55]                                                        |\n| 15.2.2                       | amendedamendedamendedamended                      | AASB 2005-4 [22]AASB 2009-11 [54]AASB 2010-7 [7, 57]AASB 2014-7 [55]                                                        |\n| 15.3                         | amended                                           | AASB 2011-8 [103]                                                                                                           |\n| 15.4.1-15.4.2                | deleted                                           | AASB 2012-10 [66]                                                                                                           |\n| 15.5                         | amendedamendedamendedamendedamendedamendedamended | AASB 2005-4 [23]AASB 2005-12 [14]AASB 2007-4 [104]AASB 2008-5 [79]AASB 2009-11 [53]AASB 2010-7 [7, 56]AASB 2011-7 [53, A13] |\n| 15.5.1                       | amendedamendedamended                             | AASB 2009-11 [53]AASB 2010-7 [7, 56]AASB 2011-7 [54, A14]                                                                   |\n| 15.5.2                       | amendedamendedamendedamendedamended               | AASB 2005-4 [24]AASB 2008-5 [79]AASB 2009-11 [53]AASB 2010-7 [7, 56]AASB 2011-7 [54, A14]                                   |\n| 15.5.3                       | deleted                                           | AASB 2005-12 [15]                                                                                                           |\n| 16.1                         | amendedamendedamended                             | AASB 2005-4 [25]AASB 2009-11 [54]AASB 2010-7 [7, 56]                                                                        |\n| 16.1.1                       | amendedamendedamended                             | AASB 2005-4 [25]AASB 2009-11 [54]AASB 2010-7 [7, 57]                                                                        |\n| 16.1.2                       | addedaddedamended                                 | AASB 2009-11 [54]AASB 2010-7 [7, 57]AASB 2014-7 [55]                                                                        |\n| 16.1.3                       | addedadded                                        | AASB 2009-11 [54]AASB 2010-7 [7, 57]                                                                                        |\n| 17.1(a), (b) & (c)           | deleted                                           | AASB 2005-2 [13]                                                                                                            |\n| 17.1(d)                      | renumbered as 17.1(a)                             | AASB 2005-2 [14]                                                                                                            |\n| 17.1(e)                      | renumbered as 17.1(b)                             | AASB 2005-2 [15]                                                                                                            |\n| 17.1(f)                      | amendedrenumbered as 17.1(c)                      | AASB 2005-2 [16]                                                                                                            |\n| 17.2                         | amendedamended                                    | AASB 2005-2 [17]AASB 2007-4 [104]                                                                                           |\n| 17.5 (and preceding heading) | deleted                                           | AASB 2007-3 [17]                                                                                                            |\n| 17.5.1                       | deleted                                           | AASB 2007-3 [17]                                                                                                            |\n| 17.6.4                       | amended                                           | AASB 2013-9A [30]AASB 2019-1 [page 25]                                                                                      |\n| AusCF17.6.4                  | added                                             | AASB 2019-1 [page 25]                                                                                                       |\n| 17.7 (and preceding heading) | amended                                           | AASB 2005-10 [41]                                                                                                           |\n| 17.7.1                       | amendedamended                                    | AASB 2005-10 [41]AASB 2009-2 [13]                                                                                           |\n| 17.7.3                       | amended                                           | AASB 2005-10 [42]                                                                                                           |\n| 17.7.4                       | amended                                           | AASB 2009-6 [100]                                                                                                           |\n| 17.7.5                       | added                                             | AASB 2005-10 [43]                                                                                                           |\n| 17.8 (and preceding heading) | addedamended                                      | AASB 2005-2 [18]AASB 2007-4 [104]                                                                                           |\n| 17.8.1                       | renumbered as 17.9.1                              | AASB 2005-2 [19]                                                                                                            |\n| 17.9.1                       | amended                                           | AASB 2005-10 [44]                                                                                                           |\n| 18.3                         | amended                                           | AASB 2005-10 [45]                                                                                                           |\n| 18.4                         | addeddeleted                                      | AASB 2009-11 [54]AASB 2010-7 [7, 57]                                                                                        |\n| 18.5                         | addeddeleted                                      | AASB 2010-7 [57]AASB 2014-7 [55]                                                                                            |\n| 19.1                         | amendedamendedamendedamendedamended               | AASB 2007-4 [103,104]AASB 2010-5 [61]AASB 2010-7 [57]AASB 2011-8 [12]AASB 2021-7 [40]                                       |\n| 19.2                         | addedamended                                      | AASB 2010-5 [62]AASB 2014-7 [55]                                                                                            |\n| Appendix, 1                  | amended                                           | AASB 2010-5 [63]                                                                                                            |\n| Appendix, 8                  | amended                                           | AASB 2010-5 [63]                                                                                                            |\n| Appendix, 17                 | amendedamendedamended                             | AASB 2005-9 [13, 25]AASB 2010-7 [56]AASB 2014-5 [42]                                                                        |\n| Appendix, 18                 | amendedamendedamended                             | AASB 2005-9 [14]AASB 2009-11 [55]AASB 2010-7 [7, 56]                                                                        |\n| Appendix, 19                 | amendedamended                                    | AASB 2009-11 [55]AASB 2010-7 [7, 56]                                                                                        |\n| Appendix, 20                 | amended                                           | AASB 2014-5 [42]                                                                                                            |\n\n## General terminology amendments General terminology amendments\n\n#### General terminology amendments\n\nThe following amendments are not shown in the above Table of amendments:\n\nReferences to ‘financial report(s)’ were amended to ‘financial statements’ by AASB 2007-8 and AASB 2007-10, except in relation to specific Corporations Act references and interim financial reports.\n\nReferences to ‘income statement’ and ‘balance sheet’ were amended to ‘statement of comprehensive income’ and ‘statement of financial position’ respectively by AASB 2007-8.\n\nReferences to ‘reporting date’ and ‘each reporting date’ were amended to ‘end of the reporting period’ and ‘the end of each reporting period’ respectively by AASB 2007-8.","sortOrder":18}],"analysis":{"kimi_summary":{"_metrics":{"completionTokens":956},"content_quality":"ok","complexity_score":8,"scope_assessment":{"changed":true,"description":"The Standard has expanded significantly from its original 2004 form. Originally focused on general insurance contracts, it now encompasses: (a) assets backing general insurance liabilities with mandatory fair value designation requirements; (b) non-insurance contracts regulated under the Insurance Act 1973; (c) complex embedded derivative separation rules; (d) expanded disclosure requirements including claims development tables and sensitivity analyses; and (e) special rules for business combinations and portfolio transfers. The 2022 amendments introducing AASB 17 as eventual replacement represent a further scope evolution toward convergence with international standards."},"complexity_factors":["Extensive cross-referencing to other standards (AASB 9, AASB 4, AASB 13, AASB 140, AASB 116, AASB 7, AASB 15, AASB 16, AASB 137, AASB 119, AASB 2, AASB 1056, AASB 3, AASB 132, AASB 134, AASB 108, AASB 136, AASB 138, AASB 10, AASB 11, AASB 128, AASB 127, AASB 1, AASB 8, AASB 101, AASB 1057, AASB 1048, AASB 17)","Multiple measurement approaches: central estimates, risk margins, discount rates, fair value through profit or loss designations","Conditional logic throughout (e.g. unbundling required/permitted/prohibited based on separability tests)","Nested exceptions and special cases (e.g. weather derivatives, financial guarantee contracts, experience accounts, multi-year reinsurance)","Actuarial concepts embedded (IBNR, IBNER, probability-weighted expected cash flows, superimposed inflation)","Dual applicability framework with AusCF paragraphs creating parallel requirements for different entity types","Detailed transitional provisions with multiple elective application dates and dependencies on other standards","Portfolio-level assessments required for liability adequacy testing with complex allocation rules"],"plain_english_summary":"**What this Standard does:**\n\nThis is the accounting rulebook for how Australian general insurers (think car insurance, home insurance, business insurance — anything that's *not* life insurance) must report their finances. It tells them exactly how to recognise revenue, measure liabilities, and disclose risks.\n\n**Key things it covers:**\n\n- **Premium revenue** — when and how insurers count the money they receive from policyholders as income (hint: not immediately — it's spread over the period of risk)\n- **Outstanding claims** — how to estimate and report money owed for claims that have happened but haven't been paid yet, including complex calculations involving \"central estimates\" (the mean of possible outcomes) plus a \"risk margin\" (extra buffer for uncertainty)\n- **Unearned premium liability** — premiums collected for coverage that hasn't been provided yet must be held as a liability\n- **Reinsurance** — how insurers account for passing risk to other insurers, and recovering money from them\n- **Assets backing liabilities** — special rules for measuring investments that back insurance obligations, requiring fair value accounting\n- **Heavy disclosure requirements** — insurers must explain their assumptions, show claims development over time, and reveal how sensitive their profits are to changes in key variables\n\n**Who it affects:**\n\nGeneral insurers, reinsurers, and certain health benefits organisations. It also touches entities that hold reinsurance contracts and those with non-insurance contracts regulated under the Insurance Act 1973.\n\n**Why it matters:**\n\nInsurance accounting is tricky because insurers collect money now for promises to pay uncertain amounts in the future. This Standard tries to make sure they don't count chickens before they hatch — revenue must match the actual risk period, and liabilities must reflect realistic estimates of future payouts including a margin for the unknown. The fair value approach for backing assets aims to reduce accounting mismatches where liabilities move with current conditions but assets don't.\n\n**Notable quirks:**\n\n- The Standard has been heavily amended over time (see the massive table of amendments) and is being superseded by AASB 17 for periods starting 1 July 2026\n- It contains special \"AusCF\" paragraphs that only apply to not-for-profits and for-profits not using the Conceptual Framework\n- It requires unbundling of deposit components (savings-like bits) from insurance components in some contracts"},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"}},"importantCases":[],"_links":{"self":"/api/acts/aasb-1023-general-insurance-contracts-july-2004","history":"/api/acts/aasb-1023-general-insurance-contracts-july-2004/history","analysis":"/api/acts/aasb-1023-general-insurance-contracts-july-2004/analysis","conflicts":"/api/acts/aasb-1023-general-insurance-contracts-july-2004/conflicts","importantCases":"/api/acts/aasb-1023-general-insurance-contracts-july-2004/important-cases","documents":"/api/acts/aasb-1023-general-insurance-contracts-july-2004/documents"}}