Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p56
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 56/101)
Character Range: 185891–188855

as a whole.

     The social benefit eligibility criteria relate to someone's inherent status, rather than relating to an uncertain future event that occurs within a particular coverage period.

     BC166        The field testing revealed that some stakeholders consider having an identifiable coverage period is an essential feature for arrangements to be accounted for as insurance contracts on the basis that:

          (a) without a coverage period, an entity would be unable to determine the relevant fulfilment cash flows to include in measuring insurance liabilities; and

          (b) having an identifiable coverage period contrasts with open-ended compensation schemes that provide benefits based on meeting eligibility criteria (and would not be accounted for as insurance contracts).

     BC167        With the benefit of feedback from field testing the indicators, the Boards noted that there is a distinction between a period being identified for the purposes of raising levies to fund a compensation scheme and the notion that an amount is collected to cover events that occur over a particular coverage period.

Boards' proposal on coverage period as an indicator in AASB ED 319/NZASB ED 2022-3

     BC168        Based on the above deliberations, the Boards decided to propose as an indicator of public sector arrangements to be accounted for as insurance contracts, the existence of an identifiable coverage period.

Enforceable nature of arrangement

     BC169        The Boards noted that an indicative criterion in IPSAS 42 for being eligible to apply the insurance approach (and apply IFRS 17) is that the arrangements between the entity and its participants are enforceable in a similar manner to an insurer being required to act in accordance with an insurance contract [IPSAS 42.AG25(a)]. Both the AASB Discussion Paper (2017) [AASB DP.E13(b)] and NZASB ED 2018-7 [ED 2018-7.AG1.6] proposed a similar indicator. The AASB Discussion Paper proposal identified as a key criterion that a participant's beneficial rights from an arrangement cannot be altered without a specific change in legislation or relevant governing measures and cannot be retrospectively amended.

     BC170        The Boards observed that, in a for-profit private sector setting, an insurer is required to act in accordance with the terms of the contract with a policyholder in terms of the types of risks covered and what constitutes insured events and, therefore, could be the subject of a valid claim. The actual amounts of compensation paid in respect of claims are determined by reference to the terms of the contract. Typically, those terms would be based on:

          (a) the extent of loss; and

          (b) the extent to which the policyholder or another party is responsible for the events that led to the loss (that is, which party is at fault), including failure to take reasonable steps to avoid the loss.

     However, in some cases, there is an