Document ID: chunk:federal_register_of_legislation:F2023C00382:front:0:p74
Version: federal_register_of_legislation:F2023C00382
Segment Type: other
Provision Reference: 
Character Range: 194793–197696

met an entity shall cease to apply paragraph B115 from that date. An entity shall not make any adjustment for changes previously recognised in profit or loss.

Recognition of the contractual service margin in profit or loss
B119 An amount of the contractual service margin for a group of insurance contracts is recognised in profit or loss in each period to reflect the insurance contract services provided under the group of insurance contracts in that period (see paragraphs 44(e), 45(e) and 66(e)). The amount is determined by:
(a) identifying the coverage units in the group. The number of coverage units in a group is the quantity of insurance contract services provided by the contracts in the group, determined by considering for each contract the quantity of the benefits provided under a contract and its expected coverage period.
(b) allocating the contractual service margin at the end of the period (before recognising any amounts in profit or loss to reflect the insurance contract services provided in the period) equally to each coverage unit provided in the current period and expected to be provided in the future.
(c) recognising in profit or loss the amount allocated to coverage units provided in the period.
B119A To apply paragraph B119, the period of investment-return service or investment-related service ends at or before the date that all amounts due to current policyholders relating to those services have been paid, without considering payments to future policyholders included in the fulfilment cash flows applying paragraph B68.
B119B Insurance contracts without direct participation features may provide an investment-return service if, and only if:
(a) an investment component exists, or the policyholder has a right to withdraw an amount;
(b) the entity expects the investment component or amount the policyholder has a right to withdraw to include an investment return (an investment return could be below zero, for example, in a negative interest rate environment); and
(c) the entity expects to perform investment activity to generate that investment return.

Reinsurance contracts held—recognition of recovery of losses on underlying insurance contracts (paragraphs 66A−66B)
B119C Paragraph 66A applies if, and only if, the reinsurance contract held is entered into before or at the same time as the onerous underlying insurance contracts are recognised.
B119D To apply paragraph 66A, an entity shall determine the adjustment to the contractual service margin of a group of reinsurance contracts held and the resulting income by multiplying:
(a) the loss recognised on the underlying insurance contracts; and
(b) the percentage of claims on the underlying insurance contracts the entity expects to recover from the group of reinsurance contracts held.
B119E Applying paragraphs 14‒22, an entity might include in an onerous group of insurance contracts both onerous