International Financial Reporting Standards_guide.pdf

Chapter 38 Insurance Contracts (IFRS 4) 421
38.9 EXAMPLES
38.9.1 The following are extracts of the disclosures explaining the amounts recognized in
the financial statements arising from insurance contracts
EXAMPLE 38.1: ACCOUNTING POLICIES
DEFINITION OF INSURANCE CONTRACTS | Insurance contracts are contracts under which one party
accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the
policyholder if a specified uncertain future event adversely affects the policyholder. Significant insurance
risk exists if an insured event could cause an insurer to pay significant additional benefits in any
scenario, excluding scenarios that lack commercial substance (i.e. have no discernible effect on the
economics of the transaction). The classification of contracts identifies both the insurance contracts
that the Group issues and reinsurance contracts that the Group holds. As a Group policy, Swiss Life
considers those contracts to be insurance contracts that require the payment of additional benefits in
excess of 10% of the benefits that would be payable if the insured event had not occurred, excluding
some that lack commercial substance.
The Group has assessed the significance of insurance risk on a contract-by-contract basis. Contracts
that do not transfer insurance risk at inception but that transfer insurance risk at a later date are classified
as insurance from inception unless the Group remains free to price the insurance premium at a
later date. In this case, the contract is classified as insurance when the insurance premiums are
specified. A contract that qualifies as an insurance contract remains an insurance contract until all
rights and obligations are extinguished or expire.
Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant
are classified as investment contracts.
INSURANCE LIABILITIES AND LIABILITIES FROM INVESTMENT CONTRACTS WITH DISCRETIONARY
PARTICIPATION FEATURES
FUTURE LIFE POLICYHOLDER BENEFIT LIABILITIES | These liabilities are determined by using the netlevel-premium
method. Depending on the type of profit participation, the calculations are based on
various actuarial assumptions as to mortality, interest rates, investment returns, expenses and persistency
including a margin for adverse deviation. The assumptions are initially set at contract issue and
are locked in except for deficiency. If the actual results show that the carrying amount of the insurance
liabilities together with anticipated future revenues (less related deferred acquisition costs [DAC] and
related intangible assets) are not adequate to meet the future obligations and to recover the unamortised
DAC or intangible assets, the entire deficiency is recognised in profit or loss, initially by reducing
the unamortised DAC or intangible assets and subsequently by increasing the insurance liabilities. The
liability adequacy test is performed at each reporting date in accordance with a loss recognition test
considering current estimates of future cash flows including those resulting from embedded options
and guarantees.
POLICYHOLDER DEPOSITS | For investment contracts with discretionary participation, savings premiums
collected are reported as deposits (deposit accounting). The liabilities relating to these contracts
are not calculated actuarially; they move in line with premiums paid by the policyholders plus interest
credited less expenses and mortality charges and withdrawals.
LIABILITIES FOR CLAIMS AND CLAIM SETTLEMENT COSTS | Liabilities for unpaid claims and claim
settlement costs are for future payment obligations under insurance claims for which normally either
the amount of benefits to be paid or the date when payments must be made is not yet fixed. They
include claims reported at the balance sheet date, claims incurred but not yet reported and claim
settlement expenses. Liabilities for unpaid claims and claim settlement costs are calculated at the
estimated amount considered necessary to settle future claims in full, using actuarial methods. These
methods are continually reviewed and updated. Claim reserves are not discounted except for claims
with determinable and fixed payment terms.
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