Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p49
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 49/101)
Character Range: 166187–169369

to rebut the 75% benchmark.

     BC140        Accordingly, the NZASB decided on Approach 3 and to propose a public-sector-specific modification of a rebuttable presumption that risk adjustments are measured at an amount that achieves a 75% confidence level in respect of liabilities for incurred claims.

     BC141        While acknowledging that providing a benchmark confidence level is not consistent with principle-based standard setting, the NZASB considered it justifiable to propose the modification because:

          (a) the cost-saving benefits of using the benchmark would exceed any loss of information value; and

          (b) the rebuttable presumption would still allow for flexibility in circumstances in which a 75% confidence level may not be appropriate.

Boards' disclosure proposal for AASB ED 319/NZASB ED 2022-3 about risk adjustments in a public sector context

     BC142        The Boards noted that there are comprehensive disclosure requirements in AASB 17/NZ IFRS 17 about risk adjustments, particularly in the requirements for reconciliations of insurance liabilities.

     BC143        Both Boards decided that it would be inappropriate to propose to require more disclosure of public sector entities than is required of other entities applying AASB 17/NZ IFRS 17 about risk adjustments in general.

Feedback on AASB ED 319/NZASB ED 2022-3

     BC144        Some respondents expressed the view that the NZASB's proposed 75% rebuttable presumption would be straightforward to implement and avoid debate about how the risk adjustment requirements should apply. Some respondents also noted the view that it would also help achieve consistency across public sector entities with the rebuttable presumption of a 75% confidence level.

     BC145        Most respondents, however, supported not having an explicit modification to AASB 17/PBE IFRS 17 for the following reasons:

          (a) consistency with principle-based standard setting;

          (b) many public sector entities would need to rebut the 75% confidence level because it would not be consistent with their existing pricing policies;

          (c) a rebuttable 75% confidence level could be viewed as more onerous than the requirements for the private sector; and

          (d) consistency across public sector entities might be able to be achieved without the need for a rebuttable presumption.

     BC146        Some respondents also supported the Boards providing some form of application guidance, including:

          (a) to explain how the risk adjustment requirements differ from the existing risk margin requirements;

          (b) on the basis that the risk adjustment requirement in AASB 17/PBE IFRS 17 is simply an expression of compensation required due to the uncertainty in fulfilling the liability – additional application guidance should be provided to assist entities that do not require compensation;

          (c) to explain whether a public sector entity can have a zero risk adjustment and the circumstances when this may be appropriate; and

          (d) to assist entities to determine when an estimate other than the central estimate would need to be