Document ID: chunk:federal_register_of_legislation:F2021C00205:body:0:p29
Version: federal_register_of_legislation:F2021C00205
Segment Type: other
Provision Reference: 
Character Range: 74918–77681

term 'uncertain future event' (paragraphs B2–B4);
(b) payments in kind (paragraphs B5–B7);
(c) insurance risk and other risks (paragraphs B8–B17);
(d) examples of insurance contracts (paragraphs B18–B21);
(e) significant insurance risk (paragraphs B22–B28); and
(f) changes in the level of insurance risk (paragraphs B29 and B30).

Uncertain future event
B2 Uncertainty (or risk) is the essence of an insurance contract. Accordingly, at least one of the following is uncertain at the inception of an insurance contract:
(a) whether an insured event will occur;
(b) when it will occur; or
(c) how much the insurer will need to pay if it occurs.
B3 In some insurance contracts, the insured event is the discovery of a loss during the term of the contract, even if the loss arises from an event that occurred before the inception of the contract. In other insurance contracts, the insured event is an event that occurs during the term of the contract, even if the resulting loss is discovered after the end of the contract term.
B4 Some insurance contracts cover events that have already occurred, but whose financial effect is still uncertain. An example is a reinsurance contract that covers the direct insurer against adverse development of claims already reported by policyholders. In such contracts, the insured event is the discovery of the ultimate cost of those claims.

Payments in kind
B5 Some insurance contracts require or permit payments to be made in kind. An example is when the insurer replaces a stolen article directly, instead of reimbursing the policyholder. Another example is when an insurer uses its own hospitals and medical staff to provide medical services covered by the contracts.
B6 Some fixed-fee service contracts in which the level of service depends on an uncertain event meet the definition of an insurance contract in this Standard but are not regulated as insurance contracts in some countries. One example is a maintenance contract in which the service provider agrees to repair specified equipment after a malfunction. The fixed service fee is based on the expected number of malfunctions, but it is uncertain whether a particular machine will break down. The malfunction of the equipment adversely affects its owner and the contract compensates the owner (in kind, rather than cash). Another example is a contract for car breakdown services in which the provider agrees, for a fixed annual fee, to provide roadside assistance or tow the car to a nearby garage. The latter contract could meet the definition of an insurance contract even if the provider does not agree to carry out repairs or replace parts.
B7 Applying the Standard to the contracts described in paragraph B6 is likely to be no more burdensome than applying the