Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p8
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 8/101)
Character Range: 51895–54936

and incurred claims and their potential future impacts; and

          (c) fair and prudent claims management.

     E32                In general, any public sector entity that is responsible for dispensing compensation (as an insurer or non-insurer) would be expected to have sound practices in respect of risk assessment, managing capital and managing claims. However, these features of some public sector arrangements are still regarded as a relevant consideration, in conjunction with the indicators identified in paragraph E7 and the other consideration identified in paragraph E8(b), to determine whether an arrangement gives rise to insurance contracts that fall within the scope of AASB 17, when the indicators are not definitive.

     E33                In particular, it may imply that an arrangement gives rise to insurance contracts that fall within the scope of AASB 17 when an entity assesses the relative riskiness of participants and prices coverage based on those assessments. This does not mean an arrangement that involves an entity charging a standard amount to all participants, regardless of risk, is necessarily outside the scope of AASB 17, because some entities (even in the private sector) are subject to regulatory constraints on pricing (as acknowledged in paragraph 20), such as community-rated pricing.

Other consideration: Assets held to meet benefits

     E34                Consideration is given to whether there is a separate fund, or earmarked assets, that are restricted to being used to meet benefits in determining whether an arrangement gives rise to insurance contracts that fall within the scope of AASB 17.

     E35                The existence of a separate fund, or earmarked assets, that are restricted to being used to meet benefits is a feature of many types of public sector arrangements. However, the feature is still regarded as a relevant consideration, in conjunction with the indicators identified in paragraph E7 and the other consideration identified in paragraph E8(a), to determine whether an arrangement gives rise to insurance contracts that fall within the scope of AASB 17, when the indicators are not definitive.

     E36                To be relevant, the separate fund or earmarked assets need not be managed by the public sector entity itself. It is the existence of a separate fund or earmarked assets that is considered, not the performance of investing activities.

Diagram – Applying the pre-requisites, indicators and other considerations

     E37                The diagram below illustrates the application of paragraphs Aus6.1, Aus6.2 and E6–E8 relevant to public sector entities for identifying arrangements that give rise to insurance contracts that fall within the scope of AASB 17. The diagram should be read in conjunction with the guidance set out in paragraphs E9–E36, as referenced in the diagram.

Basis for Conclusions

This Basis for Conclusions accompanies, but is not part of, AASB 2022-9 Amendments to Australian Accounting Standards – Insurance