Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p54
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 54/101)
Character Range: 180179–183360

other proposed indicators.

     BC157        The Boards observed that some public sector arrangements have direct counterparts with private sector insurance contracts, including for example, workers' compensation contracts. In the context of a transaction neutral approach to accounting standard setting, the Boards regard this as a useful indicator that some types of arrangements in the public sector would be accounted for by applying AASB 17/PBE IFRS 17.

     BC158        The Boards noted that an arrangement in the public sector might provide a combination of types of coverage and benefits that are not matched by a private sector insurance contract, but that components of the arrangement might be directly comparable to a private sector insurance contract. For example, in Australia, compulsory third-party motor insurance arrangements provided by a public sector entity includes coverage for serious or catastrophic injuries; whereas, the counterpart private sector insurance contracts typically do not. That serious or catastrophic injury coverage is often provided under a separate public sector arrangement.

     BC159        Accordingly, the Boards acknowledge the limitations in some circumstances of using the similarity of risks covered and benefits provided as an indicator of whether AASB 17/PBE IFRS 17 would apply because directly comparable forms of coverage may not be identifiable. However, the Boards note that considering the similarity of risks covered and benefits provided would involve a broader analysis than simply assessing whether directly comparable forms of coverage exist. Also refer to the Boards' conclusions in paragraph BC251 regarding the similarity between the risks and the benefits themselves and not the level of riskiness.

     BC160        The field testing conducted in 2021-22 on the indicators revealed mixed views. Some stakeholders considered 'similarity of risks covered and benefits provided' to be one of the most significant indicators. Other stakeholders considered that it is not a useful indicator either because:

          (a) there are examples of similar risks and benefits being addressed via insurance arrangements and (non-insurance) compensation schemes; or

          (b) there are some arrangements that are clearly insurance contracts, but are currently exclusively issued in Australia by public sector entities.

     BC161        The field testing also revealed that the perspectives of some stakeholders about what constitutes a similar risk can vary depending on whether the participants/policyholders are third parties or other public sector entities within the same government (see the discussion on 'captive' insurer at paragraphs BC260 to BC275). The Boards noted that the similarity of risks relates to the risks (or the amount and timing of cash flows) transferred and would not depend on the identity of the participants/policyholders. From the perspective of the public sector entity in its stand-alone general purpose financial statements, related-party participants/policyholders are nevertheless third parties.

Boards' proposal on similarity of risks covered and benefits as an indicator in