Document ID: chunk:federal_register_of_legislation:F2024L00075:reg:38:p53
Version: federal_register_of_legislation:F2024L00075
Segment Type: reg
Provision Reference: reg 38 (pt 53/76)
Character Range: 182992–186097

in accordance with AASB 1038.
BC162        The AASB also decided ED 223 should propose that information should be disclosed that explains and provides users with a basis for understanding the amount, timing and uncertainty of future cash flows arising from insurance obligations to members.
BC163        In response to ED 223, a number of respondents made the following points:
(a)                   it is clear those superannuation entities that 'self-insure' should be accounting for any insurance assets and liabilities, and that AASB 119 is a reasonable basis for recognising and measuring the liabilities – it was noted that such self-insurance is becoming less prevalent;
(b)                   some superannuation entities clearly state that members will only receive insurance benefits if the insurer/reinsurer pays.  Accordingly, although superannuation entities may control cash and accrue receivables and payables arising from their insurance arrangements, they are not taking on insurance risk;
(c)                   those superannuation entities offering group insurance cover that members can elect to have would reinsure those risks with a registered insurer.  In many of these arrangements it may not be entirely clear whether the superannuation entities are taking on insurance risk that should cause them to account for insurance assets and liabilities;
(d)                   in most cases, the insurance offered to defined contribution members can be re-priced at short notice.  That is, the premiums charged to member accounts can be adjusted as the insurance costs faced by the superannuation entities change (for example, as the reinsurance premiums change).  Accordingly, in such cases, any insurance contracts that might exist between the superannuation entities and their members are short in duration and the associated insurance assets and liabilities might be immaterial;
(e)                   superannuation entities occasionally make ex gratia payments in respect of death and disability claims where the trustees judge that a benefit should be paid even though it is not covered by reinsurance, but they would not be material;
(f)                    referring to both AASB 119 and AASB 1038 in relation to insurance is potentially confusing, particularly to those who are not familiar with accounting for insurance contract liabilities; and
(g)                   further guidance should be provided on when superannuation entities would be considered to be acting as agents.
BC164        The AASB concluded it should include the requirements relating to reinsurance assets from AASB 1038 in the replacement standard, rather than referencing to AASB 1038; particularly in view of the fact that AASB 1038 will be replaced at some stage.
BC165        The AASB also concluded it should proceed with the other recognition and measurement requirements consistent with the proposals in ED 223, but noted that it had concluded on an approach to measuring defined benefit member liabilities, and therefore insurance liabilities, that is different from ED 223.  The AASB also concluded