Document ID: chunk:federal_register_of_legislation:F2021C00205:body:0:p37
Version: federal_register_of_legislation:F2021C00205
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Character Range: 95606–98462

is an insurance contract, unless the aggregate life-contingent payments are insignificant.
B27 Paragraph B23 refers to additional benefits. These additional benefits could include a requirement to pay benefits earlier if the insured event occurs earlier and the payment is not adjusted for the time value of money. An example is whole life insurance for a fixed amount (in other words, insurance that provides a fixed death benefit whenever the policyholder dies, with no expiry date for the cover). It is certain that the policyholder will die, but the date of death is uncertain. The insurer will suffer a loss on those individual contracts for which policyholders die early, even if there is no overall loss on the whole book of contracts.
B28 If an insurance contract is unbundled into a deposit component and an insurance component, the significance of insurance risk transfer is assessed by reference to the insurance component. The significance of insurance risk transferred by an embedded derivative is assessed by reference to the embedded derivative.

Changes in the level of insurance risk
B29 Some contracts do not transfer any insurance risk to the issuer at inception, although they do transfer insurance risk at a later time. For example, consider a contract that provides a specified investment return and includes an option for the policyholder to use the proceeds of the investment on maturity to buy a life-contingent annuity at the current annuity rates charged by the insurer to other new annuitants when the policyholder exercises the option. The contract transfers no insurance risk to the issuer until the option is exercised, because the insurer remains free to price the annuity on a basis that reflects the insurance risk transferred to the insurer at that time. However, if the contract specifies the annuity rates (or a basis for setting the annuity rates), the contract transfers insurance risk to the issuer at inception.
B30 A contract that qualifies as an insurance contract remains an insurance contract until all rights and obligations are extinguished or expire.

Appendix C
Australian defined terms
This appendix is an integral part of the Standard.
general insurance contract  An insurance contract that is not a life insurance contract.
life insurance contract     An insurance contract, or a financial instrument with a discretionary participation feature, regulated under the Life Insurance Act 1995, and similar contracts issued by entities operating outside Australia.

Compilation details
Accounting Standard AASB 4 Insurance Contracts (as amended)
Compilation details are not part of AASB 4.
This compiled Standard applies to annual periods beginning on or after 1 January 2021. It takes into account amendments up to and including 17 September 2020 and was prepared on 15 February 2021 by the staff of the