2Scope

2                      Scope

2.1 This Standard applies to:

(a) life insurance contracts (including life reinsurance contracts) that a life insurer issues and to life reinsurance contracts that it holds;

(b) certain aspects of accounting for life investment contracts that a life insurer issues, or, in the case of a life investment contract that is reinsured, that it holds; and

(c) certain assets backing life insurance liabilities or life investment contract liabilities.

2.1.1 A life insurance contract is:

(a) an insurance contract, as defined by this Standard, regulated under the Life Insurance Act 1995, or similar contracts issued by entities operating outside Australia; or

(b) a financial instrument with a discretionary participation feature, which is regulated under the Life Insurance Act, or similar contracts issued by entities operating outside Australia.

2.1.2 All other insurance contracts are general insurance contracts and are treated under AASB 1023 General Insurance Contracts or AASB 4 Insurance Contracts.

2.1.3 A life insurer is defined as an insurer or reinsurer, registered under the Life Insurance Act, who issues life insurance contracts or life investment contracts, or a similar entity operating outside Australia.

2.1.4 This Standard applies to life insurance contracts issued by friendly societies registered under the Life Insurance Act.  Private health insurance contracts that are issued under the National Health Act 1953 by friendly societies registered under the Life Insurance Act are excluded from the scope of this Standard.  Private health insurance contracts issued under the National Health Act are treated under AASB 1023.

2.1.5 Life insurers often sell contracts that do not meet the definition of a life insurance contract in this Standard.  These contracts are referred to as life investment contracts for the purposes of this Standard.  Section 12 addresses the requirements in relation to life investment contracts.

2.1.6 A financial instrument with a discretionary participation feature, issued by a life insurer, is defined as a life insurance contract for the purposes of this Standard and in measuring the life insurance liability, issuers of such instruments would apply paragraph 8.9.  AASB 7 Financial Instruments: Disclosures addresses additional disclosure in relation to these financial instruments.

Embedded Derivatives

2.2.1 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 life insurance contract unless the embedded derivative is itself a life insurance contract.