Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p73
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 73/101)
Character Range: 232648–235767

ED 319/NZASB ED 2022-3 supported using indicators to determine whether public sector arrangements fall within the scope of AASB 17/PBE IFRS 17.

     BC240        While many respondents considered some indicators to be more relevant than others, most were in favour of retaining all the proposed indicators.

     BC241        Some respondents suggested additional or alternative indicators for arrangements being identified as insurance contracts, and others suggested indicators for arrangements that should not be identified as insurance contracts, including, for example, having a government guarantee to support the arrangements. There were mixed views on whether the fact that some public sector entities fill gaps in the private sector insurance market for the same risks as being insured by private sector insurers is indicative or non-indicative of insurance contracts.

     BC242        Some respondents also suggested amending the 'insurance contract' definition to cater more specifically for public sector circumstances, in particular, in cases when the arrangements depend largely on a regulatory framework rather than separate contracts.

     BC243        Respondents also provided the following feedback on the specific proposed indicators.

          (a) Similarity of risks covered and benefits provided: Most respondents considered this to be an important indicator because it is intuitive that a public sector arrangement which addresses similar risks and benefits to insurance contracts in the private sector would be a good candidate to fall within the scope of AASB 17/PBE IFRS 17 and is consistent with the notion of transaction neutrality. Some respondents considered that there could be two elements to this indicator: (i) similarity or comparability between the risks and the benefits themselves; and (ii) similarity with the level of riskiness when compared with private sector insurance contracts, because public sector entities are often filling a gap in the market relating to insuring the more catastrophic risks.

          (b) Identifiable coverage period: All respondents supported this indicator and many considered that it should rank above most of the other indicators, with some suggesting that it should be a pre-requisite for applying AASB 17/PBE IFRS 17. Some of these respondents noted that, without an identifiable coverage period, it would not be feasible to determine the fulfilment cash flows that should be used to measure insurance liabilities and, accordingly, it is an essential feature of an insurance contract both in principle and in practical terms. Some respondents also commented that having an identifiable coverage period can be regarded as the direct opposite of a (non-insurance) compensation scheme under which individuals or entities are eligible for benefits simply because of the inherent characteristics or status they possess at a particular time.

          (c) Enforceable nature of arrangement: All respondents supported this indicator and many considered that it should rank above most of the other indicators, with some suggesting that it should