Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698058473814.pdf (Georgia)
BB Insurance JSC International Financial Reporting Standards Financial Statements and Independent Auditor’s Report For the Year Ended December 31, 2021 BB Insurance JSC Table of Contents Statement of Management’s Responsibilities for the Preparation and Approval of the Financial Statements for the Year Ended 31 December 2021 1 Independent Auditor’s Report Statement of Financial Position Statement of Profit or Loss and Other Comprehensive Income Statement of Cash Flows Statement of Changes in Equity Notes to the Financial Statements 2 4 5 6 7 8-62 1.
REPORTING ENTITY ................................................................................................................................. 8 2.

BASIS OF ACCOUNTING .......................................................................................................................... 9 SIGNIFICANT ACCOUNTING POLICIES ................................................................................................... 11 3.

4.
4.

ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS .............................................. 20 5.

NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED ........................................................... 21 6.

CASH AND CASH EQUIVALENTS ............................................................................................................ 25 7.
DEPOSITS WITH BANKS ......................................................................................................................... 26 INVESTMENT SECURITIES HELD TO MATURITY .................................................................................... 27 8.

9.

INSURANCE RECEIVABLES ..................................................................................................................... 27 10.
INSURANCE CONTRACT RESERVES AND CEDED SHARE OF INSURANCE CONTRACT RESERVES ........... 27 11.

INVESTMENT PROPERTY ....................................................................................................................... 32 12.

PROPERTY AND EQUIPMENT ................................................................................................................ 33 13.
OTHER ASSETS ...................................................................................................................................... 34 14.

REINSURANCE COMMISSION RESERVE ................................................................................................ 34 15.

INSURANCE AND REINSURANCE PAYABLES .......................................................................................... 34 16.
OTHER FINANCIAL LIABILITIES .............................................................................................................. 34 17.

OTHER LIABILITIES ................................................................................................................................ 34 18.

EQUITY .................................................................................................................................................. 35 19.
NET EARNED PREMIUMS ...................................................................................................................... 36 20.

NET CLAIMS INCURRED......................................................................................................................... 37 21.

SALARIES AND OTHER EMPLOYEE BENEFITS ........................................................................................ 39 22.
GENERAL AND ADMINISTRATIVE EXPENSES ......................................................................................... 39 23.

OTHER OPERATING EXPENSES .............................................................................................................. 39 24.

ALLOWANCE FOR IMPAIRMENT ........................................................................................................... 40 25.
INCOME TAX EXPENSE .......................................................................................................................... 40 26.

OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES .............................................................. 42 27.

CAPITAL MANAGEMENT ....................................................................................................................... 43 28.
INSURANCE RISK MANAGEMENT ......................................................................................................... 44 29.

FAIR VALUES AND RISK MANAGEMENT ............................................................................................... 49 30.

CONTINGENCIES ................................................................................................................................... 58 31.
RELATED PARTIES.................................................................................................................................. 59 32.
EVENTS AFTER THE REPORTING PERIOD .............................................................................................. 62 Deloitte & Touche LLC Tax ID: 204422240 King David Business Center, 15th floor 12 Merab Aleksidze Street Tbilisi, 0171, Georgia Tel: +995 (32) 224 45 66 Fax: +995 (32) 224 45 69 deloitte.ge INDEPENDENT AUDITOR’S REPORT To the Shareholder and Management of JSC BB Insurance Opinion We have audited the financial statements of JSC BB Insurance (formerly referred as Hualing Insurance JSC and referred as the “Company” hereinafter), which comprise the statement of financial position as at 31 December 2021, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”).

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”).
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the “IESBA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in Georgia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (“IFRSs”), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.
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Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit.
We also:      Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.

Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.

However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Srbuhi Hakobyan On Behalf of Deloitte & Touche LLC 15 April 2022 Tbilisi, Georgia 3 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 1.

Reporting entity (a) Organization and operations These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") for the year ended 31 December 2021 for JSC BB Insurance (the “Company”).
JSC BB Insurance (formerly referred as JSC “Hualing Insurance” – the company was renamed as JSC “BB Insurance” on 26 March, 2021) was incorporated on 11 December 2017 and is domiciled in Georgia.

Registering body is Revenue Service of Georgia, Tax code 406232214.

The Company’s registered address is 1, Ketevan Tsamebuli Avenue, Tbilisi 0103, Georgia.

The Company is a joint stock company limited by shares and was set up in accordance with Georgian regulations.
As of 31 December 2021 and 2020, the Company’s immediate parent is JSC “BasisBank”, incorporated in Georgia under the banking licence issued by the National Bank of Georgia (“NBG”) in 1993.

JSC BasisBank owns three principal subsidiaries: JSC BB Insurance, JSC BB Leasing (formerly – “BHL Leasing” JSC) and Basis Asset Management Holding LLC with 100% share in each - together referred as “the Group”.
As of 31 December 2021 and 2020, ultimate shareholders of the Company were Xinjiang Hualing Industry & Trade (Group) Co Ltd incorporated in People’s Republic of China (92.305%), Mr. Mi Zaiqi (6.969%) and other minority shareholders (0.726%).

The parent is ultimately controlled by Mr. Mi Enhua, China with 91.56% of stake in Xinjiang Hualing Industry & Trade (Group) Co Ltd.

The Company’s principal business activity is insurance business operations within Georgia.
The Company has a life and non-life licenses issued by the Insurance State Supervision Service of Georgia on 27 December 2017.

(b) Georgian business environment The Company operates in Georgia.

Therefore, the Company is exposed to the economic and financial markets of Georgia which display characteristics of an emerging market.
The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in Georgia.

The financial statements reflect management’s assessment of the impact of the Georgian business environment on the operations and the financial position of the Company.

The future business environment may differ from management’s assessment.
The business community and financial sector in Georgia endured tightening of operating environment resulting in increased risks and contracted businesses in 2020.

The contraction of economy caused significant financial distress to households and businesses.

Subdued economic activity affected the insurance sector as well, the sales process of insurance products in 2020 as well as consumers’ behavior and willingness to buy insurance policy decreased.
The main affected sectors were retail through motor insurance as well as Compulsory Insurance Centre (“CIC”) operating border Motor third party liability (“MTPL”), although some contraction was perceived in corporate activity as well.

8 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 1.

Reporting entity (continued) In 2021, upon uplifting of most restrictions on businesses, the economy started to recover at rapid pace.
The measures taken by the Government provided necessary support to the businesses.

The government introduced a number of programs directed to help the businesses upholding their obligations through tax benefits, loan restructuring programs, subsidizing interest payments, elaborating new financial facilities to support the recovery of the economy.
Gradual recovery of “HORECA” sector which is a significant part of Georgia’s economy - hotels, restaurants and catering, public places such as shops/shopping malls and sectors of services, including transport, markets, stimulating consumer demand, has a direct impact on non-health insurance business.

However the full opening (most critically tourism related sectors) is still under question.

That makes the forecasts more vulnerable as are subjected to the external factors.

2.
2.

Basis of accounting a) Statement of compliance These financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and with the requirements of the Law of Georgia on Accounting, Reporting and Auditing.

The financial statements have been prepared under the historical cost convention, as modified by the initial recognition of financial instruments based on fair value, and by the revaluation of premises.
The Company has applied temporary exemptions from IFRS 9 Financial Instruments as permitted by IFRS 4 Insurance Contracts (more than 95% of the Company’s liabilities comprise insurance liabilities) and has not previously adopted any version of IFRS 9.
The Company plans to have a single date of initial application of 1 January 2023 of whole IFRS 9 and of IFRS 17. b) Going concern These financial statements have been prepared assuming that the Company is a going concern and will continue operation for the foreseeable future.

c) Functional and presentation currency The national currency of Georgia is the Georgian Lari (“GEL”), which is the Company’s functional currency and the currency in which these financial statements are presented.
d) Critical accounting judgements and key sources of estimation uncertainty The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Actual results may differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

9 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 2.

Basis of accounting (continued) Management has made the following critical judgments involving estimations in the process of applying the Company’s accounting policies that have a significant effect on the amounts recognised in these financial statements.
Insurance contract liabilities Major assumptions refer to uncertainty regarding insurance contract liabilities.

For insurance contract provisions, estimates have to be made both for the expected ultimate cost of claims reported but not settled at the reporting date (“RBNS”) and for the expected ultimate cost of claims incurred but not yet reported at the reporting date (“IBNR”).

The Company makes estimates of claims reserves on an undiscounted basis.
The assumptions used in the estimation of insurance liabilities are intended to result in reserves, which are sufficient to cover any liabilities arising out of insurance contracts so far as can reasonably be foreseen.

Reserve is made at the statement of financial position date for the expected ultimate cost of settlement of all claims notified in respect of events up to that date, whether reported or not, less amounts already paid.
The Company makes estimate of the ultimate liability arising from claims under life insurance contracts that are incurred but not yet reported at the reporting date.

The carrying amount of IBNR reserve net of reinsurance as at 31 December 2021 was 13 thousand GEL (2020: 6 thousand GEL).

The Company does not provide IBNR provision for non-life insurance products.
According to the policies issued, the client is obliged to inform the Company about the accident in 24 hours from the accident, otherwise the claim will be dismissed.

There could be only one day gap from the accident date till the reporting date.

Reserves do not represent an exact calculation of liability, but instead represent estimates, at a given accounting date.
These reserve estimates are expectations of what the ultimate settlement and administration of claims will cost based on the Company’s assessment of facts and circumstances then known, review of historical settlement patterns, estimates of trends in claims severity, frequency and other factors.

The process of estimating the insurance claims reserves is based on the most current information available at the time the reserves are originally established.
However, claims reserves are subject to change due to the number of variables which affect the ultimate cost of claims, such as:     Development in claims (frequency, severity and pattern of claims) between the amount estimated and actual experience; Changes arising due to the time lag between the occurrence of the insured event, notification of the claim (from the insured party or a third party) and the final settlement (payment) of the claim; Regulatory and legislative changes; Political and economic situation which might change some of the correlated macroeconomic parameters (inflation, foreign exchange rates, investment income rates).
Management believes that the reserve set up is adequate and there will be no need of additional reserve requirements.

10 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.

Significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below.

These policies have been consistently applied to all the periods presented, unless otherwise stated.
(a) Foreign currency transactions Transactions in foreign currencies are translated to the functional currency of the Company at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date.
The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period.

Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising in translation are recognised in profit or loss.

(b) Insurance contracts (i) Classification of contracts Contracts under which the Company accepts significant insurance risk from another party (the “policyholder”) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future event (the “insured event”) adversely affects the policyholder or other beneficiary are classified as insurance contracts.
Insurance risk is risk other than financial risk.

Financial risk is 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, 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.

Insurance contracts may also transfer some financial risk.
Insurance risk is significant if, and only if, an insured event could cause the Company to pay significant claims.

Once a contract is classified as an insurance contract, it remains classified as an insurance contract until all rights and obligations are extinguished or expire.

Contracts under which the transfer of insurance risk to the Company from the policyholder is not significant are classified as financial instruments.
11 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.

Significant accounting policies (continued) (ii) Recognition and measurement of contracts Premiums Gross premiums written comprise premiums on contracts entered into during the year, irrespective of whether they relate in whole or in part to a later accounting period.

Premiums are disclosed gross of commission payable to intermediaries and exclude taxes and levies based on premiums.
The earned portion of premiums written is recognised as revenue.

Premiums are earned from the date of attachment of risk, over the indemnity period using the daily pro-rata method.

Outward reinsurance premiums are recognised as an expense in accordance with the daily pro-rata method.

The portion of outward reinsurance premiums not recognised as an expense is treated as a prepayment.
Policy cancellations Policies are cancelled if there is objective evidence that the policyholder is not willing or able to continue paying policy premiums.

Cancellations therefore affect mostly those policies where policy premiums are paid in instalments over the term of the policy.
Unearned premium reserve The reserve for unearned premiums (“UPR”) comprises the proportion of gross premiums written which is estimated to be earned in the following or subsequent financial years, computed separately for each insurance contract using the daily pro-rata method.

(iii) Gross carrying amount and write – offs Gross carrying amount of a financial asset is the amortised cost of a financial asset, before adjusting for any loss allowance.
The Company directly reduces the gross carrying amount of a financial asset when the entity has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.

The latter includes penalties under the local regulation requirements.

The premiums are collectively assessed for write off based on overdue days criteria or are individually evaluated, depending on the premium segment and client type.
(iv) Claims Net claims incurred comprise claims settled during the financial year together with the movement in the reserve for notified claims.

Claims outstanding comprise reserves for the Company’s estimate of the ultimate cost of settling all claims incurred but unpaid at the statement of financial position date, whether reported or not.
Claims notified are assessed by reviewing individual claims and making allowance for claims incurred but not yet reported, the effect of both internal and external foreseeable events, such as changes in external claims handling expenses, legislative changes and past experience and trends.

Reserves for claims notified are not discounted.

Anticipated reinsurance and subrogation recoveries are recognised separately as assets.
Reinsurance and subrogation recoveries are assessed in a manner similar to the assessment of claims notified.

12 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.

Significant accounting policies (continued) Adjustments to the amounts of claims reserves established in prior years are reflected in the financial statements for the period in which the adjustments are made and disclosed separately if material.
The methods used, and the estimates made, are reviewed regularly.

(v) Reinsurance The Company cedes reinsurance in the normal course of business for the purpose of limiting its potential net loss through the partial transfer of risk to reinsurers.

Reinsurance arrangements do not relieve the Company from its direct obligations to its policyholders.

Premiums ceded and benefits reimbursed are presented in profit or loss and statement of financial position on a gross basis.
Reinsurance assets include balances due from reinsurance companies for ceded insurance liabilities.

Amounts recoverable from reinsurance are estimated in a manner consistent with the outstanding claims reserve or settled claims associated with the reinsured policy.

Premiums on reinsurance assumed are recognised as revenue and accounted for as if the reinsurance was considered direct business, taking into account the product classification of the reinsured business.
Amounts recoverable under reinsurance contracts are assessed for impairment at each statement of financial position date.

Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Company may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the Company will receive from the reinsurer.
Only rights under contracts that give rise to significant transfer of insurance risk are accounted for as reinsurance assets.

Rights under contracts that do not transfer significant insurance risk are accounted for as financial instruments.

(vi) Reinsurance commission reserve The Company receives commissions for ceding premiums to reinsurers.

This type of commission is recognised within insurance activity result in profit or loss.
Commission income from ceded reinsurance premiums is recognized in proportion to reinsurance premiums earned.

Changes in deferred commission income on reinsurance ceded are recorded in the statement of profit or loss and other comprehensive income.

(vii) Acquisition costs Acquisition costs represent commissions to insurance agents and brokers and other costs directly related to acquisition.
Acquisition costs become due when customers that were attracted by the relevant insurance agents and brokers pay insurance fee to the Company.

In case of advance payment of acquisition costs they are carried forward to future periods and later amortised in line with unearned premium reserve over the term of the contract.

13 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.
Significant accounting policies (continued) (viii) Liability adequacy test At each reporting date, a liability adequacy test is performed, to ensure the adequacy of unearned premiums for each line of business which are managed together.

In performing the test, current best estimates of future contractual cash flows, claims handling and policy administration expenses attributable to the unexpired periods of policies in force are used.
If a shortfall is identified an additional reserve (unexpired risk reserve) is established.

During 2021 and 2020 no shortfall was identified.

(ix) Insurance receivables and payables Amounts due to and from policyholders, agents and reinsurers are financial instruments and are included in insurance receivables and payables, and not in insurance contract reserves or reinsurance assets.

The Company reviews its insurance receivables to assess impairment on a regular basis.
(c) Financial instruments The Company classifies non-derivative financial assets into the loans and receivables category.

The Company classifies non-derivative financial liabilities into the other financial liabilities’ category.

(i) Non-derivative financial assets and financial liabilities – recognition and de-recognition The Company initially recognises loans and receivables on the date that they are originated.
All other financial assets and financial liabilities are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.
Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

(ii) Loans and receivables Loans and receivables are a category of financial assets with fixed or determinable payments that are not quoted in an active market.
Such assets are recognised initially at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

(iii) Cash and cash equivalents Cash and cash equivalents comprise cash balances and cash deposits with initial maturities of three months or less from the acquisition date that are subject to insignificant risk of changes in their fair value.
14 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.

Significant accounting policies (continued) (iv) Deposits with banks Deposits with banks are recorded when the Company advances money to banks with maturity of more than three months.

Amounts due from other banks are carried at amortised cost.

(v) Non-derivative financial liabilities - measurement The Company classifies non-derivative financial liabilities into the other financial liabilities category.
Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs.

Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.
(vi) Offsetting Financial assets and liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Company currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Company currently has a legally enforceable right to set off if that right is not contingent on a future event and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the Company and all counterparties.

Reinsurance payables and reinsurance receivables are netted upon valuation of net positions due to or from with a reinsurer based on the terms set in treaty agreements at the end of reporting period.
(vii) Gains and losses on subsequent measurement For financial assets and liabilities carried at amortised cost, a gain or loss is recognized in profit or loss when the financial asset or liability is derecognized or impaired, and through the amortization process.

(viii) Share capital Ordinary shares are classified as equity.

Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
(d) Impairment (i) Non-derivative financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.

A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
15 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.

Significant accounting policies (continued) Objective evidence that financial assets are impaired can include:     default or delinquency by a debtor; restructuring of an amount due to the Company on terms that the Company would not consider otherwise; indications that a debtor will enter bankruptcy; economic conditions that correlate with defaults.
(ii) Financial assets measured at amortised cost The Company considers evidence of impairment for these assets at both an individual asset and a collective level.

All individually significant assets are individually assessed for impairment.

Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet identified.
Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss is calculated as the difference between an asset’s carrying amount, and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

Losses are recognised in profit or loss and reflected in an allowance account against receivables.

When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off.
Interest on the impaired asset continues to be recognised through the unwinding of the discount.

When a subsequent event causes the amount of impairment loss to decrease and the decrease can be related objectively to an event occurring after the impairment was recognised, the decrease in impairment loss is reversed through profit or loss.
(iii) Non-financial assets The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment.

If any such indication exists, then the asset’s recoverable amount is estimated.
For the purpose of impairment testing, assets that cannot be tested individually are combined together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating unit (“CGU”).

The Company’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU.
Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.

16 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.

Significant accounting policies (continued) The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

Impairment losses are recognised in profit or loss.

Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amounts of the assets in the CGU on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Investment property (e) Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes).

Investment properties are measured initially at cost, including transaction costs.

Subsequent to initial recognition, investment property is carried at historical cost net of accumulated depreciation and recognised impairment loss.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal.

Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
(f) Premises and equipment Premises and equipment are stated at cost or revalued amounts, as described below, less accumulated depreciation and provision for impairment, where required.

Premises are subject to revaluation with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.
Increases in the carrying amount arising on revaluation are credited to other comprehensive income and increase the revaluation surplus in equity.

Decreases that offset previous increases of the same asset are recognised in other comprehensive income and decrease the previously recognised revaluation surplus in equity; all other decreases are charged to profit or loss for the year.
The revaluation reserve for premises and equipment included in equity is transferred directly to retained earnings when the revaluation surplus is realised on the retirement or disposal of the asset.

If there is no market based evidence of fair value, fair value is estimated using an income approach.
The Company conducts appropriate appraisal of the carrying value of buildings measured in accordance with the revaluation model at the end of the reporting period using market based evidence to ensure that the fair value of the property has not changed significantly to lead to revaluation and is satisfied that sufficient market based evidence is available to support the current fair values.

17 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.
Significant accounting policies (continued) Costs of minor repairs and day-to-day maintenance are expensed when incurred.

Costs of replacing major parts or components of premises and equipment items are capitalised, and the replaced part is retired.

At the end of each reporting period management assesses whether there is any indication of impairment of premises and equipment.
If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use.

The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the year to the extent it exceeds the previous revaluation surplus in equity.
An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell.

Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or loss for the year (within other operating income or expenses).

Depreciation Construction in progress are not depreciated.
Depreciation of other items of premises and equipment is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives: Premises Office and computer equipment Useful lives in years 50 5 The residual value of an asset is the estimated amount that the Company would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

g) Intangible assets The Company’s intangible assets have definite useful life and primarily include capitalised computer software and licences.

Acquired computer software licences are capitalised on the basis of the costs incurreds to acquire and bring to use the specific software.

Capitalised costs include costs of the software development service made by external contractors.
All other costs associated with computer software, e.g.

its maintenance, are expensed when incurred.

Capitalised computer software without functional maturity is amortised on a straight line basis over expected useful lives of 7 years.

(h) Income tax Income tax expense comprises current and deferred tax.

Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
18 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 3.

Significant accounting policies (continued) (i) Current tax Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Current tax payable also includes any tax liability arising from dividends.
The new system of corporate income taxation does not imply exemption from Corporate Income Tax (CIT), rather CIT taxation is shifted from the moment of earning the profits to the moment of their distribution; i.e.

the main tax object is distributed earnings.

The Tax Code of Georgia defines Distributed Earnings (DE) to mean profit distributed to shareholders as a dividend.
However, some other transactions are also considered as DE, for example non-arm’s length cross-border transactions with related parties and/or with persons exempted from tax are also considered as DE for CIT purposes.

In addition, the tax object includes expenses or other payments not related to the entity’s economic activities, free of charge supply and over-limit representative expenses.
The corporate income tax arising from the payment of dividends is accounted for as an expense in the period when dividends are declared, regardless of the actual payment date or the period for which the dividends are paid.

(ii) Deferred tax Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and temporary differences related to investments in subsidiaries, branches and associates where the parent is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities until 1 January 2023, using tax rates enacted or substantially enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available until 1 January 2023 against which the temporary differences, unused tax losses and credits can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Due to the nature of the new taxation system described above, the financial institutions registered in Georgia will not be subject to income tax attributable to the period profit (before distribution in a form of dividend or other forms of profit distributions) from 1 January 2023 and hence, no deferred income tax assets and liabilities will arise, there on.

19 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 4.
Adoption of New or Revised Standards and Interpretations In the current year, the Company has applied the below amendments to IFRS Standards and Interpretations issued by the Board that are effective for an annual period that begins on or after January 1, 2021.

Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.
Interest Rate Benchmark Reform amendments to IFRS 9 and IFRS 7 Amendments to IFRS 16 – Covid-19-Related Rent Concessions In September 2019, the IASB issued Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).
These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the on-going interest rate benchmark reforms.

The amendments are not relevant to the Company given that it does not apply hedge accounting to its benchmark interest rate exposures.
Respectively, the application of the amendments does not impact the Company’s accounting for the year ended December 31, 2021.

The amendments also introduce new disclosure requirements to IFRS 7 for hedging relationships that are subject to the exceptions introduced by the amendments to IFRS 9.
In the prior year, the Company early adopted Covid-19-Related Rent Concessions (Amendment to IFRS 16) that provided practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19, by introducing a practical expedient to IFRS 16.

This practical expedient was available to rent concessions for which any reduction in lease payments affected payments originally due on or before 30 June 2021.
The practical expedient permits a lessee to elect not to assess whether a COVID-19- related rent concession is a lease modification.

A lessee that makes this election shall account for any change in lease payments resulting from the COVID-19-related rent concession applying IFRS 16 as if the change were not a lease modification.

The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if certain criteria are met.
The effect of the adoption of the amendment was not significant to the financial statements of 2020 and 2021.

20 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 5.

New Standards and Interpretations not yet adopted New and revised IFRS Standards in issue but not yet effective.
At the date of authorisation of these financial statements, the Company has not applied the following new and revised IFRS Standards that have been issued but are not yet effective: New or revised standard or interpretation IFRS 17 "Insurance contracts” Amendments to IFRS 17 "Insurance contracts” Amendments to IAS 1 "Classification of Liabilities as Current or Non-current” (as part of the project to formulate Annual Improvements to IFRS 2010-2012 cycles).
Amendments to IAS 8 – "Definition of Accounting Estimates” Amendments to IAS 1 and IFRS Practice Statement 2 – "Disclosure of Accounting Policies” Annual Improvements to IFRS Standards 2018-2020: Amendments to IFRS 3 – “Reference to the Conceptual Framework” Amendments to IAS 16 Property, Plant and Equipment – Revenue Before Intended Use Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” – “Loss-making Contracts – Completion Value” Amendments to IAS 12 Deferred Tax Relating to Assets and Liabilities Arising from a Single Transaction Amendment to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Applicable to annual reporting periods beginning on or after 1 January 2023 1 January 2023 1 January 2023 1 January 2023 1 January 2023 1 January 2022 1 January 2022 1 January 2022 1 January 2023 Date to be determined by the IASB The Company does not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Company in future periods except for IFRS 17.
IFRS 17 Insurance Contracts.

IFRS 17 establishes principles for recognition, measurement, disclosure and presentation of insurance contracts, and supersedes IFRS 4 Insurance Contracts.

IFRS 17 establishes a general model, which is modified and defined with respect to insurance contracts with direct participation features as the variable fee approach.

If certain criteria are met, the general model is simplified by measuring liability for the remaining coverage using the premium allocation approach.
The general model uses current assumptions to estimate the amount, timing and uncertainty of future cash flows, and it separately estimates the cost of such uncertainty.

The model takes into account market interest rates and the impact of options and guarantees of policyholders.

Standard is effective for annual periods beginning on or after January 1, 2023, with earlier application permitted.
It is applied retrospectively, if practicable, otherwise a modified retrospective approach or fair value accounting should be applied.

The draft of Amendments to IFRS 17, issues and difficulties associated with the implementation, which were identified after the issuance of IFRS 17.

In this regard, the official entry into force of the standard was postponed until January 1, 2023 (established – from January 1, 2021).
In order to meet transitional requirements, the date of initial application is the beginning of the annual reporting period in which the entity first applies this standard, and the date of transition is the beginning of the period immediately preceding the date of initial application.

21 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 5.

New Standards and Interpretations not yet adopted (continued) Amendments to IFRS 17.
‘Amendments to IFRS 17’ were made to address concerns and implementation challenges that were identified after IFRS 17 ‘Insurance Contracts’ was published in 2017.

The amendments are effective for annual periods beginning on or after 1 January 2023 with earlier application permitted.

The effective date has yet to be set; however, earlier application of the amendments is permitted.

The management of the Company is currently assessing the impact of the amendments on its financial statements.
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” (as part of the project to formulate Annual Improvements to IFRS 2010-2012 cycles).

The amendments to IAS 1 affect only the presentation of liabilities as current or non-current in the statement of financial position and not the amount or timing of recognition of any asset, liability, income or expenses, or the information disclosed about those items.
The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the reporting period, and introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
The amendments are applied retrospectively for annual periods beginning on or after 1 January 2023, with early application permitted.

Amendments to IAS 8 “Definition of Accounting Estimates”.
The changes to IAS 8 focus entirely on accounting estimates and clarify the following:  The definition of a change in accounting estimates is replaced with a definition of accounting estimates;  Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty;  The Board clarifies that a change in accounting estimate that results from new information or new developments is not the correction of an error;  A change in an accounting estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods.
The amendments are effective for annual periods beginning on or after 1 January 2023 and changes in accounting policies and changes in accounting estimates that occur on or after the start of that period.

Earlier application is permitted.

22 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 5.

New Standards and Interpretations not yet adopted (continued) Amendments to IAS 1 and IFRS Practice Statement 2 – "Disclosure of Accounting Policies”.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) amends IAS 1 in the following ways:  An entity is now required to disclose its material accounting policy information instead of its significant accounting policies;  Several paragraphs are added to explain how an entity can identify material accounting policy information and to give examples of when accounting policy information is likely to be material;  The amendments clarify that accounting policy information may be material because of its nature, even if the related amounts are immaterial;  The amendments clarify that accounting policy information is material if users of an entity’s financial statements would need it to understand other material information in the financial statements; and  The amendments clarify that if an entity discloses immaterial accounting policy information, such information shall not obscure material accounting policy information.
In addition, IFRS Practice Statement 2 has been amended by adding guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ to accounting policy information in order to support the amendments to IAS 1.

The amendments are applied prospectively.

The amendments to IAS 1 are effective for annual periods beginning on or after 1 January 2023.

Earlier application is permitted.


Once the entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2.

Annual Improvements to IFRS 2018-2021 Cycles.

The list of amendments includes amendments to the three standards, as well as annual improvements to the Board, which are changes that clarify the wording or eliminate minor inconsistencies, omissions or contradictions between the requirements in the standards.
    The amendments to IFRS 3 Business Combinations update the reference in IFRS 3 to the Conceptual Framework for Financial Statements without changing the accounting requirements for a business combination.

Amendments to IAS 16 Property, Plant and Equipment prohibit deducting from the value of property, plant and equipment the amounts received from the sale of manufactured goods while preparing the asset for its intended use.
Instead, these sales revenue and related costs are recognized in profit or loss.

Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” determine the costs to be included in assessing whether the contract is onerous.

Annual improvements introduce minor amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards”, IFRS 9 “Financial Instruments”, IAS 41 “Agriculture” and illustrative examples accompanying IFRS 16 “Leases”.
All amendments are effective on January 1, 2023, early application is permitted.

23 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 5.

New Standards and Interpretations not yet adopted (continued) Amendments to IAS 12 “Deferred Tax Relating to Assets and Liabilities Arising from a Single Transaction”.

The amendments introduce a further exception from the initial recognition exemption.
Under the amendments, an entity does not apply the initial recognition exemption for transactions that give rise to equal taxable and deductible temporary differences.

Depending on the applicable tax law, equal taxable and deductible temporary differences may arise on initial recognition of an asset and liability in a transaction that is not a business combination and affects neither accounting nor taxable profit.
For example, this may arise upon recognition of a lease liability and the corresponding right-of-use asset applying IFRS 16 at the commencement date of a lease.

Following the amendments to IAS 12, an entity is required to recognise the related deferred tax asset and liability, with the recognition of any deferred tax asset being subject to the recoverability criteria in IAS 12.

The Board also adds an illustrative example to IAS 12 that explains how the amendments are applied.
The amendments apply to transactions that occur on or after the beginning of the earliest comparative period presented.
In addition, at the beginning of the earliest comparative period an entity recognises:  A deferred tax asset (to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised) and a deferred tax liability for all deductible and taxable temporary differences associated with: - Right-of-use assets and lease liabilities - Decommissioning, restoration and similar liabilities and the corresponding amounts recognised as part of the cost of the related asset;  The cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at that date.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023, with earlier application permitted.

Amendment to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.

The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture.
Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognized in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture.
Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognized in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture.

The effective date of the amendments has yet to be set by the Board; however, earlier application of the amendments is permitted.
The directors of the Company anticipate that the application of these amendments may have an impact on the Company’s financial statements in future periods should such transactions arise.

24 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 6.
Cash and cash equivalents In Georgian Lari Current Accounts December 31, 2021 December 31, 2020 448,975 728,902 Total cash and cash equivalents 448,975 728,902 Credit ratings of cash and cash equivalents were as follows: BB+ BB BB- B+ Not rated Total December 31, 2021 December 31, 2020 38,684 - 3,393 49,477 357,421 - 742 445,163 281,876 1,121 448,975 728,902 As at 31 December 2021 there were two placements with unrated Georgian banks (2020: there were no significant placements with unrated Georgian banks).
25 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 7.
Deposits with Banks In Georgian Lari JSC Credo Bank JSC Hayk Bank JSC BasisBank JSC Finca Bank December 31, 2021 December 31, 2020 7,176,231 2,833,680 54,701 - 7,243,798 - 54,716 1,350,571 Total bank deposits 10,064,612 8,649,085 As at 31 December 2021 and 2020 out of total amount of deposit placed in Banks, 4,200,000 GEL is attributable to minimum capital requirements set by the Insurance State Supervision Service of Georgia.
Credit ratings of placements with banks were as follows: In Georgian Lari BB+ B+ Not rated Total December 31, 2021 December 31, 2020 2,833,680 54,701 7,176,231 - 54,716 8,594,369 10,064,612 8,649,085 Bank deposit balances are neither past due nor impaired.

Bank deposits are represented by placements with Georgian commercial banks in Georgian Lari.

Bank deposit placed with related party (BasisBank JSC) earn annual interest rate of 11% (2020: 11%).

Refer to Note 31.
Refer to Note 31.

The remaining maturity and average interest rates of deposits as at 31 December 2020 and 2021 were as follows: In Georgian Lari From 1 to 6 months From 6 to 12 months More than 1 year December 31, 2021 December 31, 2020 Avg.

% Amount Avg.
% Amount Avg.

% Amount 11.0% 13.2% 922,776 9,141,836 13.5% 11.5% - 492,298 8,156,787 - Total 13.0% 10,064,612 11.6% 8,649,085 As at 31 December 2021 54,701 GEL (2020: 38,500 GEL) from deposits placed in parent company (Basisbank JSC) was pledged under a Guarantee agreement received from the parent.

Refer to Note 31.

26 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 8.
Investment securities held to maturity In Georgian Lari Promissory notes Total investments in debt securities December 31, 2021 December 31, 2020 300,230 300,230 300,115 300,115 Investment securities held to maturity comprise promissory notes from “JSC Swiss Capital” with the rating of B- and face value of GEL 300,000 (2020: promissory notes purchased from “JSC Swiss Capital” with the rating of B- and the face value of GEL 300,000).
In September 2021, upon its maturity the old promissory note was exchanged for another promissory note of the same issuer with the same face value.

Maturity of the promissory note held as at 31 December 2021 is 13 September 2022.

9.
9.

Insurance receivables In Georgian Lari Insurance receivables, gross: Life insurance contracts General insurance contracts Subrogation Receivable Less - provision for impairment for amounts due from policyholders: General insurance contracts Subrogation Receivable December 31, 2021 December 31, 2020 60,400 5,276,046 618,538 (58,338) (355,421) 29,283 2,769,982 349,999 (47,655) (234,976) Insurance receivables, net 5,541,225 2,866,633 10.
Insurance contract reserves and Ceded share of insurance contract reserves In Georgian Lari Insurance contract reserves Unearned premiums reserves Reported but not settled claims Incurred but not reported claims Total insurance contract reserves Ceded share of insurance contract reserves Unearned premiums reserves Reported but not settled claims December 31, 2021 December 31, 2020 5,998,830 900,543 12,890 3,192,475 447,812 6,176 6,912,263 3,646,463 (5,312,164) (614,629) (2,523,330) (281,268) Ceded share of insurance contract reserves (5,926,793) (2,804,598) Insurance contracts reserves net of reinsurance Unearned premiums reserves Reported but not settled claims Incurred but not reported claims Total insurance contract reserves net of reinsurance 686,666 285,914 12,890 669,145 166,544 6,176 985,470 841,865 27 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 10.
Insurance contract reserves and Ceded share of insurance contract reserves (continued) UP Reserve December 31, 2021 December 31, 2020 In Georgian Lari Life Insurance Motor Insurance Property Insurance Aviation Insurance Third Party Liability (Compulsory) Other Total Reinsurers share in unearned premium Unearned premium reserve reserve - 1,362,347 418,646 3,865,738 124,594 227,505 - (941,403) (330,178) (3,856,883) - (183,700) 5,998,830 (5,312,164) Reinsurers share in unearned premium Unearned premium reserve reserve - 1,164,755 390,576 1,319,267 104,652 213,226 - (756,057) (287,478) (1,316,343) - (163,452) Net - 408,698 103,098 2,924 104,652 49,774 3,192,476 (2,523,330) 669,146 Net - 420,944 88,468 8,855 124,594 43,805 686,666 Incurred but not reported claims reserve is only related to life insurance policies.
Respective reserve is not created for other insurance policies as long as there is no lag between accident date and reporting date of the claim.
RBNS Reserve December 31, 2021 December 31, 2020 In Georgian Lari Life Insurance Motor Insurance Property Insurance Aviation Insurance Third Party Liability (Compulsory) Other Total Reported but not settled Reinsurers share of reported but not settled claims claims 90,756 751,639 8,600 - 27,688 21,860 (75,388) (513,516) (8,237) - - (17,488) 900,543 (614,629) Reported but not settled Reinsurers share of reported but not settled claims claims 20,902 320,879 25,000 - 49,352 31,680 (18,812) (218,263) (21,250) - - (22,944) Net 2,090 102,616 3,750 - 49,352 8,736 447,813 (281,269) 166,544 Net 15,368 238,123 363 - 27,688 4,372 285,914 28 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 10.
Insurance contract reserves and Ceded share of insurance contract reserves (continued) In Georgian Lari a Life Insurance Contracts b General Insurance Contracts December 31, 2021 December 31, 2020 Reinsurers’ share of insurance contract reserves Insurance contract reserves 103,646 6,808,617 (75,388) (5,851,405) Reinsurers’ share of insurance contract reserves Insurance contract reserves 27,077 3,619,386 (18,812) (2,785,787) Net 8,266 833,599 Net 28,258 957,212 Total Insurance Contract Reserves 6,912,263 (5,926,793) 985,470 3,646,463 (2,804,598) 841,865 In Georgian Lari a At 1 January Premiums written during the year Premiums earned during the year Claims incurred during the year Claims settled during the year Incurred but not reported claims 2021 Reinsurers’ share of insurance contract reserves Insurance contract reserves 27,077 (18,812) 542,040 (542,040) 267,124 (197,270) 6,714 (284,244) 284,244 (203,865) 147,289 - Net 8,266 257,797 (257,797) 63,260 (49,981) 6,714 2020 Reinsurers’ share of insurance contract reserves Insurance Contract reserves 9,858 (5,090) 224,653 (224,653) 25,855 (10,608) 1,972 (101,142) 101,142 (23,269) 9,547 - Net 4,768 123,511 (123,511) 2,585 (1,061) 1,972 At 31 December 103,646 (75,388) 28,258 27,077 (18,812) 8,266 29 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 10.
Insurance contract reserves and Ceded share of insurance contract reserves (continued) In Georgian Lari b At 1 January Premiums written during the year Premiums earned during the year Claims incurred during the year Claims settled during the year 2021 Reinsurers’ share of Insurance contract reserves Insurance contract reserves 3,619,386 (2,785,787) 2020 Reinsurers’ share of Insurance contract reserves Insurance contract reserves Net 4,415,391 (3,510,250) 905,141 Net 833,599 12,841,486 (10,035,132) 2,587,803 (2,204,926) (10,487,093) 7,698,259 (1,655,825) 1,379,041 2,354,393 (2,336,873) 931,978 (825,885) 7,203,347 (8,194,062) 2,564,035 (2,369,325) (4,865,444) 5,694,015 (1,869,318) 1,765,210 2,337,903 (2,500,047) 694,717 (604,115) At 31 December 6,808,617 (5,851,405) 957,213 3,619,386 (2,785,787) 833,599 30 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 10.
Insurance contract reserves and Ceded share of insurance contract reserves (continued) In Georgian Lari Movement of Claims Reserves 2021 2020 Reserves for claims, beginning of the year Reserves for claims, reinsurance share, beginning of the year 453,988 (281,268) 242,059 (163,438) Net reserves for claims, beginning of the year Claims incurred during the year Claims settled during the year Incurred but not reported claims Claims incurred during the year reinsurance share Claims settled during the year reinsurance share 172,720 2,854,928 (2,402,197) 6,714 (1,859,691) 1,526,330 78,621 2,589,890 (2,379,935) 1,972 (1,892,588) 1,774,758 Net reserves for claims, end of the year Reserves for claims, reinsurance share, end of the year 298,804 614,629 172,718 281,269 Reserves for claims, end of the year 913,433 453,987 In Georgian Lari Movement of premium reserves 2021 2020 Gross unearned insurance premium reserve, beginning of the year Unearned insurance premium reserve, reinsurance share, beginning of the year 3,192,475 (2,523,330) 4,183,191 (3,351,901) Net unearned insurance premium reserve, beginning of the year 669,146 831,290 Change in unearned insurance premium reserve Change in unearned insurance premium reserve, reinsurance share Net change in unearned insurance premium reserve 2,806,354 (2,788,834) 17,520 (990,715) 828,571 (162,144) Net unearned insurance premium reserve, end of the year Unearned insurance premium reserve, reinsurance share, end of the year 686,666 5,312,164 669,146 2,523,330 Gross unearned
 insurance premium reserve, end of the year 5,998,830 3,192,476 31 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 11.
Investment property In Georgian Lari Cost as at 1 January Acquisitions Transfer from property and equipment Disposals Cost as at December 31 Accumulated depreciation as at 1 January Depreciation charge Accumulated depreciation as at 31 December 2021 - - 1,657,459 - 1,657,459 - - - Net Book Value 31 December 1,657,459 2020 - - - - - - - - - 32 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 12.
Property and equipment In Georgian Lari Cost January 1, 2020 Additions Disposals Buildings and other real estate Furniture and equipment Vehicles Intangible Assets Total - 44,651 19,200 72,000 135,851 1,657,459 - 26,141 (1,996) - - 28,133 - 1,711,733 (1,996) As at 31 December 2020 1,657,459 68,796 19,200 100,133 1,845,588 Additions Transfers to investment property Disposals - (1,657,459) 4,975 - - - - - 4,975 (1,657,459) As at 31 December 2020 - 73,771 19,200 100,133 193,104 Accumulated depreciation and impairment January 1, 2020 Depreciation charge Disposals December 31, 2020 Depreciation charge Disposals December 31, 2021 Net book value - - - - - - - 6,779 5,050 4,708 16,537 12,525 - 3,861 - 13,933 - 30,318 - 19,304 8,911 18,640 46,855 13,893 - 3,840 - 15,020 - 32,753 - 33,197 12,751 33,660 79,608 As at December 31, 2021 - 40,574 6,449 66,473 113,496 As at December 31, 2020 1,657,459 49,492 10,289 81,493 1,798,732 33 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 13.
Other assets In Georgian Lari Salvages Income tax prepayment Prepayments to Compulsory Insurance Center Prepayments Deferred tax assets December 31, 2021 December 31, 2020 46,860 25,016 23,529 9,051 15,259 64,752 25,069 23,529 26,663 13,727 Total other assets 119,715 153,740 14.

Reinsurance commission reserve Reinsurance commission reserve is attributable to unearned portion of commission receivable from reinsurer.

15.
15.

Insurance and reinsurance payables In Georgian Lari Reinsurance Premium Payable Agents Commission Payable December 31, 2021 December 31, 2020 4,481,436 87,048 2,277,039 76,112 Total Insurance and Reinsurance payables 4,568,484 2,353,151 16.

Other financial liabilities In Georgian Lari Payable to ISSSG Payables for professional services Other creditors Total other financial liabilities 17.
Other liabilities In Georgian Lari Accruals for employee compensation Advances received Taxes payable Other liabilities Total other liabilities December 31, 2021 December 31, 2020 105,772 43,862 17,322 84,187 46,397 15,790 166,956 146,374 December 31, 2021 December 31, 2020 274,204 12,620 8,137 79 295,040 257,931 2,414 8,335 15,250 283,930 34 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 18.
Equity At 1 January 2020 New shares issued Number of outstanding shares Ordinary shares Total 4,300,000 4,300,000 4,300,000 1,700,000 1,700,000 1,700,000 At 31 December 2020 6,000,000 6,000,000 6,000,000 At 31 December 2021 6,000,000 6,000,000 6,000,000 As at 31 December 2021 the total authorized number of ordinary shares is 6,000,000 (2020: 6,000,000), with a par value of GEL 1 per share (2020: GEL 1 per share).
As at 31 December 2021 the number of ordinary issued shares is 6,000,000 (2020: 6,000,000 shares).

All issued ordinary shares are fully paid.

Each ordinary share carries one voting right.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company.
In accordance with Georgian legislation the Company’s distributable reserves are limited to the balance of retained earnings as recorded in the Company’s statutory financial statements prepared in accordance with local regulatory standards.

No dividends were declared or paid in 2021 and 2020.

35 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 19.
Net earned premiums In Georgian Lari Premium written on life insurance contracts Premium written on general insurance contracts 2021 2020 542,040 12,841,486 224,653 7,203,347 Total premiums written 13,383,526 7,428,000 Change in gross reserves for general unearned premiums (2,806,354) 990,715 Total earned premiums 10,577,172 8,418,715 Reinsurers’ earned premium on life insurance contracts Reinsurers’ earned premium on general insurance contracts (284,243) (7,698,260) (101,141) (5,694,016) Total net earned premiums 2,594,669 2,623,558 Premium earned per product: In Georgian Lari Aviation Insurance Third Party Liability (Compulsory) Motor Insurance Property Insurance Life Insurance Other Total premium earned 2021 Reinsurance premium earned Net premium earned Total Premium earned 2020 Reinsurance premium earned 5,111,480 1,255,406 2,452,490 683,428 542,040 532,328 5,108,332 - 1,620,021 531,937 284,244 437,969 3,148 1,255,406 832,469 151,491 257,796 94,359 3,440,457 1,247,903 2,366,766 695,757 224,653 443,180 3,441,524 - 1,468,078 472,125 101,142 312,289 Net premium earned (1,067) 1,247,903 898,688 223,632 123,511 130,891 Total premium earned 10,577,172 7,982,503 2,594,669 8,418,716 5,795,158 2,623,558 Premium written per product: In Georgian Lari Aviation Insurance Third Party Liability (Compulsory) Motor Insurance Property Insurance Life Insurance Other 2021 2020 7,657,951 1,275,348 2,650,081 711,499 542,040 546,607 2,580,640 1,202,900 2,281,644 687,312 224,653 450,851 Total premium written 13,383,526 7,428,000
 36 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 19.
Net earned premiums (continued) During the year ended 31 December 2021, the Company recorded GWP from transactions with related parties in the amount of 3,352,556 GEL (2020: 2,039,028 GEL), which exceeds 10% of the total GWP for the period.

20.
Net claims incurred In Georgian Lari Life insurance claims settled General insurance claims settled Reinsurer’s share of life insurance claims settled Reinsurer’s share of general insurance claims settled 2021 2020 197,270 2,204,926 (147,289) (1,379,041) 10,608 2,369,325 (9,547) (1,765,210) Total net claims settled 875,866 605,176 Gross change in reported but not settled claims Incurred but not reported claims Reinsurer’s share of change in reported but not settled claims Subrogation and Recoveries 452,731 6,714 (333,360) (525,598) (499,226) 1,972 591,352 (366,609) Net claims incurred 476,354 332,665 37 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 20.
Net claims incurred (continued) Distribution of claims incurred for contracts entered into force during 2021 and 2020 between products types are set out below: 2021 In Georgian Lari Life Insurance Motor Insurance Property Insurance Aviation Insurance Third Party Liability (Compulsory) Other Reported but not settled Reinsurer’s share in claims Reinsurer’s share in reported but not settled Claims settled claims Total claims settled claims Total reinsurer’s share in claims 197,270 2,005,667 66,776 - 118,254 14,230 90,756 751,639 8,600 - 27,688 21,860 288,026 2,757,306 75,376 - 145,941 36,090 147,289 1,310,880 56,777 - - 11,384 75,388 513,516 8,237 - - 17,488 222,676 1,824,397 65,014 - - 28,872 Total 2,402,197 900,543 3,302,739 1,526,330 614,629 2,140,959 2020 In Georgian Lari Life Insurance Motor Insurance Property Insurance Aviation Insurance Third Party Liability (Compulsory) Other Total Reported but not settled Reinsurer’s share in claims Reinsurer’s share in reported but not settled Claims settled claims Total claims settled claims Total reinsurer’s share in claims 10,608 1,335,189 123,941 799,762 92,999 17,435 20,902 320,879 25,000 - 49,351 31,680 31,510 1,656,068 148,941 799,762 142,351 49,114 9,547 830,878 120,623 799,762 - 18,812 218,263 21,250 - - 13,948 22,944 28,359 1,049,141 141,873 799,762 - 36,891 2,379,934 447,812 2,827,746 1,774,758 281,269 2,056,026 38 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 21.
Salaries and other employee benefits In Georgian Lari Salaries Bonuses Insurance and other benefits 2021 2020 1,129,392 377,286 17,450 1,071,412 359,823 17,718 Total salaries & other employee benefits 1,524,128 1,448,953 22.
General and administrative expenses In Georgian Lari Supervisory fee Claims Regulation costs Rent Audit and consulting Software Marketing Depreciation Post, Telecomm, Utilities Repair & Maintenance Bank fees and other commissions Training costs Fuel Fines and penalties Other administrative costs 2021 2020 105,771 73,509 73,200 45,052 36,982 32,802 32,753 11,454 7,930 7,691 2,610 2,460 2,000 51,464 84,187 32,003 64,740 47,812 24,000 99,750 30,318 14,822 8,226 8,593 - 3,057 5,750 41,974 Total General and administrative expenses 485,678 465,234 Professional service fee above includes GEL 45,052 (2020: GEL 47,000) - fees incurred for audit and other professional services provided by Auditor/Audit Firm as defined in the Law of Georgia on Accounting, Reporting and Auditing.
23.

Other operating expenses In Georgian Lari CIC management fee Other (income)/expenses, net 2021 215,883 4,895 2020 175,832 (7,727) Total other operating expenses 220,778 168,105 39 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 24.
Allowance for Impairment The movement in the allowance for insurance and reinsurance receivables were as follows: At 1 December 2020 Impairment charge Insurance Receivables Subrogation Total (5,654) (64,934) (70,587) (42,001) (170,042) (212,043) At 31 December 2020 (47,655) (234,976) (282,631) Impairment charge At 31 December 2021 (10,683) (58,338) (120,445) (131,128) (355,421) (413,759) Allowances for impairment of assets are deducted from the carrying amounts of the related assets.

25.
25.

Income tax expense (a) Components of income tax expense Income tax expense comprises of the following: In Georgian Lari Current tax charge Deferred tax asset 2021 2020 (265,992) 1,532 (265,405) 16,971 Income tax expense for the year (264,458) (248,434) (b) Reconciliation between the tax expense and profit or loss multiplied by applicable tax rate The company’s applicable income tax rate was 15% in 2021 (2020: 15%).
In Georgian Lari Profit before tax 2021 2020 1,638,002 1,610,019 Theoretical tax charge at statutory rate (2021: 15%; 2020: 15%) (245,700) (241,502) Tax effect of items which are not deductible or assessable for taxation purposes: - Income items not recognized in P&L, but taxable from taxation viewpoint - Non-deductible expenses and other permanent differences (1,078) (17,680) (699) (6,233) Income tax expense for the year (264,458) (248,434) 40 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 25.
Income tax expense (continued) On 13 May 2016 the Parliament of Georgia passed a bill on corporate income tax reform (also known as the Estonian model of corporate taxation), which mainly moves the moment of taxation from when taxable profits are earned to when they are distributed.
The law has entered into force in 2016 and is effective for tax periods starting after 1 January 2017 for all entities except for financial institutions (such as banks, insurance companies, microfinance organizations, pawnshops), for which the law was planned to become effective from 1 January 2019.

On 28 December 2018, the law was further amended.

The Financial Institution’s transition to the new taxation system becomes effective from 1 January 2023, instead of 1 January 2019.
Due to the nature of the new taxation system described above, the financial institutions registered in Georgia will not be subject to income tax attributable to the period profit (before distribution in a form of dividend or other forms of profit distributions) from 1 January 2023 and hence, no deferred income tax assets and liabilities will arise, there on.
(c) Deferred taxes analyzed by type of temporary difference Differences between IFRS and statutory taxation regulations in Georgia give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases.
The tax effect of the movements in these temporary differences is detailed below: In Georgian Lari Tax effect of deductible/(taxable) temporary differences Premises, Investment property and equipment Accruals 1 January, 2021 Credited/ (charged) to profit or loss 31 December, 2021 9,878 3,849 1,532 - 11,410 3,849 Net deferred tax asset 13,727 1,532 15,259 In Georgian Lari 1 January, 2020 Credited/ (charged) to profit or loss 31 December, 2020 Tax effect of deductible/(taxable) temporary differences Premises and equipment Accruals (5,244) 2,000 1,849 15,122 9,878 3,849 Net deferred tax liability (3,244) 16,971 13,727 41 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 26.
Offsetting financial assets and financial liabilities As of 31 December 2021 and 2020, financial instruments subject to offsetting, enforceable master netting and similar arrangements were as follows: In Georgian Lari 31 December 2021 31 December 2020 Gross amounts before offsetting (a) Gross amounts set off Net amount after offsetting (b) (c) = (a) - (b) Gross amounts before offsetting (a) Gross amounts set off Net amount after offsetting (b) (c) = (a) - (b) Receivables from reinsurer Reinsurance commission receivable 1,162,488 939,103 (1,080,390) (810,228) 82,098 128,875 1,290,156 1,340,998 (1,276,448) (1,246,660) 13,707 94,338 Total assets subject to offsetting, master netting and similar arrangement 2,101,591 (1,890,618) 210,973 2,631,154 (2,523,108) 108,045 Reinsurance payables 6,368,186 (1,890,618) 4,477,567 4,834,304 (2,523,108) 2,311,196 Total liabilities subject to offsetting, master netting and similar arrangement 6,368,186 (2,523,108) 4,477,567 4,834,304 (2,523,108) 2,311,196 42 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 27.
Capital management (a) Capital management objectives, policies and approach The main objective of capital management is to monitor and maintain, at all times, an appropriate level of capital which is commensurate with the company’s risk profile.
The capital management of the Company has the following objectives:  Compliance with the requirements of the Insurance State Supervision Services of Georgia;  Maintain financial strength to support new business growth and to satisfy the requirements of policyholders, regulator and other stakeholders;  Maintaining the composition and structure of the assets accepted to cover insurance liabilities, when due and to exceed regulatory requirements; and  Maintaining the required level of stability of the company thereby providing a degree of security to policyholders.
It is in the Company’s interest to maintain adequate capital resources at all times and to fulfil respective minimum regulatory capital requirements.

The primary source of capital used by the Company is financed through the issuance of shares.

Maintaining a good capital base in the future is of crucial importance to the Company, both to allow the Company to take advantage of profitable growth opportunities and to cushion the effects of large loss events.
As part of the process monitoring and managing its capital, the Company has implemented controls over conformity of the composition and structure of the assets, enabling the Company to constantly maintain a minimum level of funds, placed in top Georgian banks.

The insurance sector in Georgia is regulated by the Insurance State Supervision Service of Georgia (“ISSSG”).

The ISSSG imposes minimum capital requirements for insurance companies.
These requirements are put in place to ensure sufficient solvency margins.

ISSSG sets regulatory capital requirements in Georgia.

ISSSG requirement is to maintain capital of GEL 7,200 thousand of which 100% percent should be kept at the banking institutions licensed in Georgia.

JSC BB Insurance was in compliance with capital requirements set by ISSSG during 2021 and 2020.
(b) Regulatory requirements According to the ISSSG directive №04, issued on 20 April 2015, the minimum capital throughout the period should be not less than GEL 2,200 thousand and the Company should, at all times, maintain total of this amount in either cash and cash equivalents or in bank balances.

From December 2021, the minimum capital requirement increased to GEL 7,200 thousand.

The Company was in compliance with the externally imposed capital requirements as at 31 December 2020 and 2021.
On 16 September 2016, ISSSG issued directives №15 and №16 on the determination of the Regulatory Solvency Margin (“RSM”) and Regulatory Capital, respectively.

The laws also impose the requirements on maintaining minimum Regulatory Capital benchmarking against RSM.

43 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 27.

Capital management (continued) From 31 December 2018 the minimum Regulatory Capital requirement was the higher of 100% of RSM or GEL 4,200 thousand.
Starting from 31 December 2021 the minimum Regulatory Capital is the higher of 100% of RSM or GEL 7,200 thousand.

The Regulatory Capital is determined based on the IFRS equity in the statement of financial position, with certain deductions such as investments in subsidiaries and associates, unsecured loans and borrowings, etc.

as prescribed by the ISSSG directive №16.

As at 31 December 2020 and 2021, the Company was in full compliance with the required level of Regulatory Capital.

28.
28.

Insurance risk management (a) Risk management objectives and policies for mitigating insurance risk The primary insurance activity carried out by the Company assumes the risk of loss from individuals or organisations that are directly subject to the risk.

Such risks mainly relate to life, motor and other non- health segments, such as, property, liability, cargo, travel or other perils that may arise from an insurable event.
As such the Company is exposed to the uncertainty surrounding the timing and severity of claims under the insurance contract.

The principal risk is that the frequency and severity of claims is greater than expected.

Insurance events are, by their nature, random, and the actual number and size of events during any one year may vary from those estimated using established statistical techniques.

The Company also has exposure to market risk through its insurance and investment activities.
The Company manages its insurance risk through the use of reinsurance of risk concentrations, underwriting limits, approval procedures for transactions and monitoring of emerging issues.

(i) Underwriting strategy The Company’s underwriting strategy seeks diversity so that the Company’s portfolio at all times includes several classes of non-correlating risks and that each class of risk, in turn, is spread across a large number of policies.
Management believes that this approach reduces the variability of the outcome.

The underwriting strategy is set out in the Company’s insurance risk management policies.

The strategy is implemented through underwriting guidelines that determine detailed underwriting rules for each type of product.
The guidelines contain insurance concepts and procedures, descriptions of inherent risk, terms and conditions, rights and obligations, documentation requirements, template agreement/policy examples, rationale of applicable tariffs and factors that would affect the applicable tariff.

The tariff calculations are based on probability and variation.
Adherence to the underwriting guidelines is monitored by the Deputy General Director on an on-going basis, also on a regular basis the board of directors monitors the trends of loss ratio and business profitability.

Regular analysis triggers BOD to react accordingly, and to provide changes in the products pricing/specifications in order to maintain the desired loss ratio.

44 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 28.
Insurance risk management (continued) (ii) Reinsurance strategy The Company reinsures a portion of the risks it underwrites in order to control its exposures to losses and protect capital resources.

The Company buys Treaty reinsurance for the biggest lines of business, Life, Casco, Cargo, GTPL and Property and also Facultatively Reinsures every risk in the above-mentioned products that fall out of the Treaty Reinsurance limitations.
Ceded reinsurance contains credit risk, and such reinsurance recoverable are reported after deductions for known insolvencies and uncollectible items.

The Company monitors the financial condition of reinsurers on an on-going basis and reviews its reinsurance arrangements and reinsurer international ratings periodically.
(b) Terms and conditions of insurance contracts and nature of risks covered The terms and conditions of insurance contracts that have a material effect on the amount, timing and uncertainty of future cash flows arising from insurance contracts are set out below.

In addition, the following gives an assessment of the Company’s main products and the ways in which it manages the associated risks.
(i) Motor insurance Product features The Company has two types of Motor insurance, fully comprehensive insurance (“Casco”) and motor third party liability insurance (“MTPL”).

Under Casco contracts, corporate entities and individuals are reimbursed for any loss of, or damage caused to their vehicles.

MTPL contracts provide indemnity cover to the owner of the motor vehicle against compensation payable to third parties for property damage, death or personal injury.
Motor insurance includes short tail coverage.

Claims that are typically made quickly are those that indemnify the policyholder against motor physical damage or loss.

Claims that take longer to finalise, and are more difficult to estimate, relate to bodily injury claims.

The mandatory border motor third party liability insurance (“BMTPL”) in Georgia is provided by Compulsory Insurance Centre (“CIC”).
CIC is a non-profit organization established according to the Civil Code of Georgia in January 2018 and its main function and responsibilities are to provide MTPL non-stop client services, realization of insurance policies and regulation of losses according to the Administrative law of Georgia which obliges the holder/driver of the foreign-registered motor vehicle registered in a foreign country to insure civil liability for the motor vehicle in ownership, during the full period of stay in Georgia.
The compulsory insurance shall cover damages arising as a result of an insured event caused by the participation of the said vehicle or for reasons related to it.

The CIC is founded by insurers participating in the co-insurance system in order to manage compulsory insurance, these are 18 Georgian insurance companies including the Company.

The center manages the sale of policies, manages the claims and distributes its profit and/or losses incurred equally among its board member companies.
45 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 28.

Insurance risk management (continued) Management of risk In general, motor claims reporting lags are minor, if any, and claim complexity is relatively low.

Overall the claims liabilities for this line of business create a moderate estimations risk.

The Company monitors and reacts to trends in repair costs, injury awards and the frequency of theft and accident claims.
The frequency of claims is affected by adverse weather conditions, and the volume of claims is higher in the winter months.

Motor lines of insurance are underwritten based on the Company’s current experience.

(ii) Property insurance Product features The Company writes property insurance.

This is comprised of corporate and retail property insurance.

Property insurance indemnifies the policyholder, subject to any limits or excesses, against the loss or damage to their own tangible property.
The event giving rise to a claim for damage to buildings or contents usually occurs suddenly (as for fire and burglary) and the cause is easily determinable.

The claim will thus be notified promptly and can be settled without delay.

Property business is therefore classified as short-tailed.

Management of risk The key risks associated with this product are underwriting risk, competitive risk and claims experience risk (including the variable incidence of natural disasters).
The Company is also exposed to the risk of exaggeration and dishonest action by claimants.

Underwriting risk is the risk that the Company does not charge premiums appropriate for the different properties it insures.

Many commercial property proposals comprise a unique combination of location, type of business, and safety measures in place.

Calculating a premium commensurate with the risk for these policies will be subjective, and hence risky.
These risks are managed primarily through the pricing and reinsurance processes.

The Company uses strict underwriting criteria to ensure that the risk of losses is acceptable to the Company.

The Company reinsures its property risks by way of Excess of Loss, Surplus and Nat Cat treaties.
(iii) Life insurance Product features The Company writes life insurance contracts where the event giving a rise to claim is the death or permanent disability of the beneficiary and the policyholder is insured for the remaining credit towards financial institution of for a pre-determined amount.

46 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 28.
Insurance risk management (continued) Management of risk The Company’s underwriting strategy is to ensure that risks are well diversified by industry sectors and geography.

The Company also has right to reject payment in case a fraudulent claim is identified.

The Company uses reinsurance contracts for all life insurance risks and the exposure of risk is limited to 10% of total claim.

One of the key risks associated with this product is the lag between the accident date and reporting date of the claim.
Because of this risk, incurred but not reported claims reserve is set up for life insurance contracts, calculated according to the chain-ladder statistical methodology.

(iv) Aviation insurance Product features The Company issues aviation insurance contracts.

The risks covered are damages made to aircraft hull, harm done to aircraft passengers and crew, harm or damage done to third parties and their property.
Management of risk All aviation contracts represent fronting contracts, which means that 100% of the risk is ceded to the reinsurer.

The Company itself does not pay any of the claims that insured clients make.

100% of written GWP is transferred to reinsurers, whereas the Company received commission income from the reinsurers.
(c) Concentrations of insurance risk A key aspect of the insurance risk faced by the Company is the extent of concentration of insurance risk which may exist where a particular event or series of events could impact significantly upon the Company’s liabilities.

Such concentrations may arise from a single insurance contract or through a number of related contracts with similar risk features and relate to circumstances where significant liabilities could arise.
An important aspect of the concentration of insurance risk is that it may arise from the accumulation of risks within a number of individual classes or contract tranches.

Concentrations of risk can arise in both high-severity, low frequency events, such as natural disasters and in situations where underwriting is biased towards a particular company, such as a particular geography.

The Company’s key methods in managing these risks are two-fold.
Firstly, the risk is managed through appropriate underwriting.

Underwriters are not permitted to underwrite risks unless the expected profits are commensurate with the risks assumed.

Secondly, the risk is managed through the use of reinsurance.

The Company purchases reinsurance coverage for various classes of its motor, life and property business.

The Company assesses the costs and benefits associated with the reinsurance programme on an on-going basis.
(d) Claims development Claims development information is disclosed in a triangle format in order to illustrate the insurance risk inherent in the Company.

The first triangle shows the development of the cumulative claims paid on an accident year basis, while the second triangle shows the development of the reported but not settled 47 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 28.

Insurance risk management (continued) reserve on an accident year basis.
Finally, the sum of these two triangles gives the incurred cumulative claims information.

From the claims paid triangle it is seen that there was a significant increase in the claims paid amount since the accident year of 2020.

The reported but not settled reserve triangle shows that in 2021 there was an increase in RBNS by about 2 times.

These changes are associated with an increase in losses on CASCO and MTPL contracts.
While the information in the table provides a historical perspective on the adequacy of unpaid claims estimates established in previous years, readers of these financial statements are cautioned against extrapolating redundancies or deficiencies of the past on current unpaid loss balances.

The Company believes that the estimate of total claims outstanding at the end of 2021 is adequate.
Annual Paid Cumulative triangle - as at 31 December 2021: Accident period \ Development period 0 1 2 2018 2019 2020 2021 49,952 1,376,603 2,118,378 2,086,726 78,470 1,545,160 2,315,595 78,470 1,545,160 Annual RBNS Cumulative triangle - as at 31 December 2021: Accident period \ Development period 2018 2019 2020 2021 0 29,800 194,841 381,460 808,087 1 - 17,000 54,768 2 - 10,000 Annual Incurred Cumulative triangle - as at 31 December 2021: Accident period \ Development period 0 1 2 3 78,470 3 - 3 2018 2019 2020 2021 79,752 1,571,445 2,499,838 2,894,813 78,470 1,562,160 2,370,362 78,470 1,555,160 78,470 RBNS from BMTPL amounted 63,767 GEL (2020: 49,532 GEL).
(e) Reinsurance risk The Company cedes insurance risk to limit exposure to underwriting losses under various agreements that cover individual and portfolio risks.

These reinsurance agreements spread the risk and minimise the effect of losses.

The amount of each risk retained depends on the Company’s evaluation of the specific risk.

Under the terms of the reinsurance agreements, the reinsurer agrees to reimburse the ceded amount in the event the claim is paid.
However, the Company remains liable to its policyholders with respect to ceded insurance if any reinsurer fails to meet the obligations it assumes.

When selecting a reinsurer, the Company considers their relative creditworthiness.

The creditworthiness of the reinsurer is assessed mainly from publicly available information.

48 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (a) Fair value of financial assets and liabilities A number of the Company’s accounting policies and disclosures require the determination of fair values for financial assets and financial liabilities.

Fair values have been determined for disclosure purposes.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:    Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e.

as prices) or indirectly (i.e.


derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
(i) Recurring fair value measurements Recurring fair value measurements are those that the accounting standards require or permit in the statement of financial position at the end of each reporting period.
The level in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows: In Georgian Lari Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 31 December, 2021 31 December, 2020 - Premises and equipment - Investment property TOTAL ASSETS WITH RECURRING FAIR VALUE MEASUREMENTS - - - - - - 1,977,818 1,977,818 - 1,977,818 1,977,818 - - - - - 1,657,459 1,657,459 - - - - 1,657,459 1,657,459 49 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (continued) The valuation technique, inputs used in the fair value measurement for level 3 measurements and related sensitivity to reasonably possible changes in those inputs are as follows: Fair value at 31 December In Georgian Lari 2021 2020 NON-FINANCIAL ASSETS - Premises - 1,657,459 - Investment property 1,977,818 - Inputs used Management’s assessment of the expected variance from the determined fair value Price per square meter Price per square meter 165,746 197,782 Valuation technique Market comparable assets Market comparable assets TOTAL RECURRING FAIR VALUE MEASUREMENTS AT LEVEL 3 1,977,818 1,657,459 50 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (continued) (ii) Assets and liabilities not measured at fair value but for which fair value is disclosed: In Georgian Lari Level 1 Level 2 Level 3 Carrying value Level 1 Level 2 Level 3 Carrying value 31 December 2021 31 December 2020 Cash and cash equivalents Deposits with banks (certificates of deposit) Deposits with banks (term deposits) Investment in securities held to maturity Insurance receivables Reinsurance receivables 448,975 10,305,798 - 328,630 448,975 10,064,612 300,230 5,541,225 210,973 728,902 - - - - - - 7,384,348 1,434,299 319,710 - - - - - - 2,866,633 108,045 728,902 7,243,798 1,405,287 300,115 2,866,633 108,045 5,541,225 210,973 Total financial assets 448,975 10,634,428 5,752,198 16,566,015 728,902 9,138,357 2,974,679 12,652,781 Insurance and reinsurance payables Other financial liabilities Total financial liabilities 4,568,484 166,956 4,568,484 166,956 4,735,440 4,735,440 - - - - - - 2,353,151 146,374 2,353,151 146,374 2,499,525 2,499,525 Management believes that the fair value of the Company’s accounts receivable and accounts payable approximates their carrying amounts due to their short maturities.
(b) Presentation of financial instruments by measurement category For the measurement purposes, IAS 39, Financial Instruments: Recognition of Measurement, classifies financial assets into the following categories: (a) loans and receivables; (b) available for sale financial assets; (c) financial assets held to maturity and (d) financial assets at fair value through profit or loss (“FVTPL”).
Financial assets at fair value through profit or loss have two subcategories: (i) assets designated as such upon initial reco gnition, and (ii) those classified as held for trading.

In addition, finance lease receivables form a separate category.

At the reporting date all financial assets were classified as (a) loans and receivables except for an investment in promissory note classified as (c) held to maturity.

All of the Company’s financial liabilities were carried at amortised cost.
51 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.

Fair values and risk management (continued) (c) Financial risk management The Company has exposure to the following risks from its use of financial instruments:  Credit risk;  Liquidity risk;  Market risk.

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk.
Further quantitative disclosures are included throughout these financial statements (i) Risk management framework The Supervisory Board together with the Company’s management has overall responsibility for the establishment and oversight of the Company’s risk management framework and is responsible for developing and monitoring the Company’s risk management policies and reporting regularly to the shareholders on its activities.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.

Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.
The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

Supervisory Board monitors the Company’s management compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
(ii) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation.

The Company’s exposure to credit risk is monitored on an ongoing basis.

The Company reinsures certain risks with the reinsurance companies.
The selection of reinsurance companies is based on criteria mainly related to solvency, reliability and creditworthiness of the counterparty which includes and is not limited to checking international credit ratings of reinsurers.

52 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.

Fair values and risk management (continued) Credit exposure The table below shows the maximum exposure to credit risk for the components of the statement of financial position.
In Georgian Lari Bank deposits Insurance receivables Cash and cash equivalents Investment securities held to maturity Reinsurance receivables 31 December 2021 31 December 2020 10,064,612 5,541,225 448,975 300,230 210,973 8,649,085 2,866,633 728,902 300,115 108,045 Total credit exposure 16,566,015 12,652,780 The aging of insurance receivables at the reporting date was: In Georgian Lari Gross 2021 Impairment 2021 Gross 2020 Impairment 2020 Not past due Past due 0-30 days Past due 31-90 days Past due 91-180 days Past due 181-270 days Past due 271-365 days Past due more than one year 1,567,969 2,571,224 1,188,968 90,377 60,176 110,438 365,831 - - 46,284 48,793 29,561 56,351 232,769 317,090 2,012,858 401,486 92,017 34,556 67,434 223,822 - - 25,936 33,059 20,002 42,778 160,855 Total 5,954,983 413,758 3,149,263 282,630 The Company is not subject to significant credit risk on receivables arising out of direct insurance operations with individuals as policies are cancelled and the unearned premium reserve relating to the policy is similarly cancelled when there is objective evidence that the policyholder is not willing or able to continue paying policy premiums.
Management normally fully provides for impaired premium receivables after they are 365 days overdue.

(iii) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet its commitments.

Liquidity risk exists when the maturities of assets and liabilities do not match.

The matching and/or controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of financial institutions, including the Company.
It is unusual for financial institutions ever to be completely matched since business transacted is often of an uncertain term and of different types.

An unmatched position potentially enhances profitability but can also increase the risk of losses.

53 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (continued) The Company maintains liquidity management with the objective of ensuring that funds will be available at all times to honour all cash flow obligations as they become due.

The Company’s liquidity positions are reviewed by the management on a monthly basis.

Maturity profiles The Company uses maturity analysis in managing its liquidity risk.
Most of the Company’s financial liabilities are contractually due to be settled in a year after the reporting date, Management estimates that the timing of cash outflows from insurance contract liabilities does not exceed one year.
Georgian Lari At 31 December 2021 Assets Cash and cash equivalents Bank deposits Investment securities held to maturity Insurance receivables Reinsurance receivables Ceded share of insurance contract reserves Demand and less than 1 month 1 month to 6 monts 6 to 12 months More than 1 year Total 448,975 - - 425,493 86,440 625,629 - 922,776 - 692,584 16,165 681,401 - 9,141,836 300,230 4,423,148 108,368 4,619,763 - - - - - - 448,975 10,064,612 300,230 5,541,225 210,973 5,926,793 Total financial assets 1,586,537 2,312,926 18,593,345 - 22,492,808 Liabilities Insurance contract reserves Commission payables Reinsurance payables Other financial liabilities 1,053,529 3,547 625,345 87,627 764,289 89,165 705,102 26,443 5,094,445 378,123 3,238,037 52,886 - - - - 6,912,263 470,835 4,568,484 166,956 Total financial liabilities 1,770,048 1,584,999 8,763,491 - 12,118,538 Net liquidity gap Cumulative liquidity gap (183,511) (183,512) 727,927 544,416 9,829,854 10,374,270 - 10,374,270 - 54 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (continued) Georgian Lari At 31 December 2020 Demand and less than 1 month 1 month to 6 monts 6 to 12 months More than 1 year Total Assets Cash and cash equivalents Bank deposits Investment securities held to maturity Insurance receivables Reinsurance receivables Ceded share of insurance contract reserves 728,902 - - 109,767 13,707 281,269 - 492,298 - 713,548 25,907 657,714 - 8,156,787 300,115 2,043,319 68,431 1,865,615 Total financial assets 1,133,645 1,889,467 12,434,267 Liabilities Insurance contract reserves Commission payables Reinsurance payables Deferred income tax liability Current income tax liability Other financial liabilities 562,390 - 77,193 3,778 - 146,374 798,516 96,233 - - - - 2,285,557 287,343 2,275,958 - - - Total financial liabilities 789,735 894,749 4,848,858 Net liquidity gap Cumulative liquidity gap 343,910 343,910 994,718 1,338,628 7,585,409 8,924,037 728,902 8,649,085 300,115 2,866,633 108,045 2,804,599 15,457,379 3,646,463 383,576 2,353,151 3,778 - 146,374 6,533,342 - - - - - - - - - - - - - - - 8,924,037 (iv) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
To mitigate the Company’s exposure to market risk policies and procedures are in place to set and monitor asset allocation and portfolio limit structures.

55 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (continued) (v) Geograpical Concentration Georgian Lari At 31 December 2021 Assets Cash and cash equivalents Bank deposits Investment securities held to maturity Insurance receivables Reinsurance receivables Ceded share of insurance contract reserves Georgia OECD Non-OECD Total 448,975 10,064,612 300,230 5,541,225 33,937 1,136,899 - - - - 6,975 293,156 - - - - 170,061 4,496,738 448,975 10,064,612 300,230 5,541,225 210,973 5,926,793 Total financial assets 17,525,878 300,131 4,666,799 22,492,808 Liabilities Insurance contract reserves Commission payables Reinsurance payables Other financial liabilities 6,912,263 32,649 1,045,408 166,956 - 217 177,084 - - 437,969 3,345,992 - 6,912,263 470,835 4,568,484 166,956 Total financial liabilities 8,157,276 177,301 3,783,961 12,118,538 Net position 9,368,602 122,830 882,838 10,374,269 Georgian Lari At 31 December 2020 Assets Cash and cash equivalents Bank deposits Investment securities held to maturity Insurance receivables Reinsurance receivables Ceded share of insurance contract reserves Georgia OECD Non-OECD Total 728,902 8,649,085 300,115 2,866,633 53,591 1,387,405 - - - - - - - - 11,633 281,932 42,822 1,135,262 728,902 8,649,085 300,115 2,866,633 108,045 2,804,598 Total financial assets 13,985,732 293,565 1,178,083 15,457,379 Liabilities Insurance contract reserves Commission payables Reinsurance payables Deferred income tax liability Current income tax liability Other financial liabilities 3,646,463 53,113 1,927,982 3,778 - 146,374 - 95
 212,060 - - - - 330,369 213,109 - - - 3,646,463 383,576 2,353,151 3,778 - 146,374 Total financial liabilities 5,777,710 212,155 543,478 6,533,342 Net position 8,208,022 81,410 634,606 8,924,038 56 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (continued) (vi) Currency risk The Company’s assets and liabilities are denominated in more than one currency.

If the assets and liabilities in one currency do not match, the Company has an open currency position (“OCP”) and is exposed to potentially unfavourable changes in exchange rates.

Management is responsible for continuously monitoring the development of exchange rates and foreign currency markets.
The Company aims to close currency positions and ensures that an open currency position remains within the limits at all times.

The Company is exposed to currency risk mainly on insurance receivables and payables denominated in USD and EUR.
The Company’s exposure to foreign currency risk was as follows: In Georgian Lari 31 December 2021 31 December 2020 USD denominated EUR denominated USD denominated EUR denominated Cash and cash equivalents Insurance receivables Reinsurance receivables Ceded share of insurance contract reserves Insurance contract reserves Reinsurance payables 22,797 4,394,863 1,585,191 4,634,503 (4,970,648) (4,904,843) 8,355 8,227 7,784 95,023 (97,101) (24,143) 254,661 1,666,469 100,353 1,814,072 (2,087,244) (1,922,086) - 150,915 4,436 147,804 (151,973) (147,856) Net Exposure 761,863 (1,856) (173,775) 3,326 The following significant exchange rates have been applied: In GEL USD EUR In GEL USD EUR Average Rate 2021 3.2209 3.814 Average Rate 2020 3.1097 3.5519 Reporting date spot rate 31 December 2021 3.0976 3.504 Reporting date spot rate 31 December 2020 3.2766 4.0233 57 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 29.
Fair values and risk management (continued) Sensitivity analysis A reasonably possible strengthening (weakening) of GEL, as indicated below, against USD and EUR at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss after tax by the amounts shown below.
The analysis assumes that all other variables, in particular interest rates, remain constant: In Georgian Lari 31 December 2021 USD (20% movement) EUR (20% movement) 31 December 2020 USD (20% movement) EUR (20% movement) (vii) Interest rate risk Strengthening Profit or (Loss) and Equity Weakening Profit or (Loss) and Equity (152,373) 371 34,755 (665) 152,373 (371) (34,755) 665 Fluctuations in market interest rates may affect adversely the financial position and the results of operations of the Company.
As of 31 December 2021 the Company had no exposure to floating rate interest bearing instrument, therefore, management believes that the Company does not have significant exposure to interest rate risk.

30.

Contingencies (a) Legal proceedings There are no major legal disputes as of the reporting date which could have a material impact on the Company’s financial position.
(b) Taxation contingencies Georgian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Company.

Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be challenged tax authorities.
A tax year remains open to review by the authorities in respect of taxes for three calendar years preceding the year when decision about review was made.

Under certain circumstances reviews may cover longer periods.

In accordance with Georgian transfer pricing legislation, there are reporting and documentation requirements.
Tax authorities may assess additional tax charges in respect of certain transactions, including but not limited to transactions with related parties, if they consider transactions to be priced not at arm’s length.

58 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 30.
Contingencies (continued) Given the legislation and practice, the application and interpretation of tax legislation, particularly in respect of transfer pricing and transactions with related parties, remains subject to uncertainty and it is possible that material adjustments to tax liabilities may arise in the future.
Management has reached certain judgements and interpretations in relation to compliance with all relevant tax legislation and in accordance with the guidance on accounting for uncertain tax items.

The management believes that the judgments and interpretations made can be believed to be fair after considering all the relevant facts at the date of these financial statements.

31.
31.

Related parties (a) Parent and ultimate controlling party As of 31 December 2021 and 2020, the Company’s immediate parent company was JSC “BasisBank” incorporated in Georgia.

As of 31 December 2021 and 2020 ultimate shareholder of the Company were Xinjiang Hualing Industry & Trade (Group) Co Ltd incorporated in People’s Republic of China (92.305%), Mr. Mi Zaiqi (6.969%) and other minority shareholders 0.726%.

(b) Key management remuneration Key management includes Directors (executive).
In Georgian Lari Salaries and bonuses Insurance 2021 2020 Expense Accrued Liability Expense Accrued Liability 729,957 2,092 233,222 661,482 2,020 220,867 - Total key management compensation 732,049 233,222 663,502 220,867 59 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 31.
Related parties (continued) (a) Transactions with other related parties The outstanding balances and related expense and income as for the year ended 31 December 2021 and 2020 with related parties are as follows: In Georgian Lari Assets Cash and cash equivalents Bank deposits Insurance receivables Entities Under Common Control* 212,185 2021 Parent Company 49,413 54,701 42,022 Entities Under Common Control* Other* 2020 Parent Company Other - - 1,032,909 149,991 278,003 54,716 21,845 - - 1,119,034 Total assets 212,185 146,136 1,032,909 149,991 354,564 1,119,034 Liabilities Insurance contract reserves Commission payables 197,193 - 128,388 - 1,124,362 - 153,694 - 133,797 113 1,322,630 - Total liabilities 197,193 128,388 1,124,362 153,694 133,910 1,322,630 Off – Balance; Guarantee received 38,500 38,500 The guarantee is issued in favor of Compulsory Insurance Center (CIC) by the JSC BasisBank to cover unexpected losses which t he center may incur during its operations, and the claim for the payment is refundable within 1 working day.
60 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 31.
Related parties (continued) In Georgian Lari Income Statement Earned premium Interest income Claims Settled Change in outstanding claims Acquisition costs Foreign exchange gain/losses Entities Under Common Control* 2021 Parent Company Entities Under Common Control* Other* 243,083 - 133,768 (7,550) - 11,288 545,631 6,777 66,813 32,967 97 291 1,944,544 - 3,067 (900) - 8,115 242,086 232,228 (4,650) - (12,581) 2020 Parent Company 408,036 6,835 52,086 20,747 608 2,397 Other 2,391,637 124,284 (275) - (22,673) Total 380,589 652,576 1,954,826 457,083 490,708 2,492,973 Bank deposits placed with related parties earn annual interest rate of 11%.
Entities under common control includes JSC Basis Bank’s subsidiaries.

Other related parties mostly comprise members of Hualin g Group (subsidiaries of ultimate shareholder, etc).

61 BB Insurance JSC Notes to the Financial Statements for the Year Ended December 31, 2021 32.

Events after the reporting period On 21 February 2022, the President of Russia signed the executive orders on the recognition of the Donetsk People’s Republic and the Lugansk People’s Republic.
On 24 February 2022, a decision to carry out a special military operation in Ukraine was announced.

Subsequent to these events, the US, UK, EU and other countries announced an extension of sanctions on certain Russian officials, businessmen and companies.

These developments may result in reduced access of the Russian businesses to international capital and export markets, weakening of the Russian Ruble, decline in capitals markets and other negative economic consequences.
The two major sectors of Georgian economy, wine production and tourism industry, are heavily dependent on the Russian market: according to market analysts’ assessment, approximately half of the exported Georgian wine in 2021 were to Russia, the second largest being Ukraine; in the tourism sector, Russia and Ukraine also account for significant portion of travelers.

War in Ukraine has already affected current insurance sector in Georgia in terms of reinsurance activities.
Due to sanctions, introduced to Russia and Russian reinsurance companies, Regulator has launched special instructions for insurance sector, not to place reinsurance risks on Russian markets and obliged Georgian insurers to provide them with action plan, for replacing current markets.

Some risks of BB Insurance related to aviation insurance on a facultative bases were reinsured with Russian reinsurers having ratings of BBB category, who had treaty reinsurance lines with A-ranked European companies.
As a result of drop of Russia’s country rating, BB Insurance started to replace considerable portion of its aviation portfolio with highly ranked reinsuarance markets, having positive influence of premium generation, with considerable increase.

As for the other lines: Like CARGO, CASCO etc.

the impact was low thus far.

BB Insurance have some exposures with transportation companies insuring their trailers and transported goods and often the rout goes through Russia and Ukrain.
However, routs are not insured againts war risk, which is an exclusion.

Thus the war has no impact on risks side, however will have a low impact on GWP, as those clients might cancel the insurance coverage for areas in Russia and Ukraine thus decreasing payment of premiums.

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