Document ID: chunk:federal_register_of_legislation:F2023C00194:body:0:p8
Version: federal_register_of_legislation:F2023C00194
Segment Type: other
Provision Reference: 
Character Range: 19588–22411

insurers use bases of recognition that attempt to approximate this date.  Such bases are acceptable provided that they do not result in the recognition of a materially different amount of premium revenue in a particular reporting period than would be the case if recognition occurred from the date of attachment of risk for each general insurance contract.
4.2.5 In recognising premium from the attachment date, an insurer may recognise premiums relating to general insurance contracts when the contract period commences after the reporting period, commonly referred to as premiums in advance.  The attachment date is the date from which an insurer accepts risk.  An insurer may accept risk prior to the date a contract commences: for example, it is not unusual for insurers to issue renewals, and for renewals to be paid for by policyholders, prior to the commencement date of an insurance contract.  For commercial lines insurance, where the policyholder may be using the services of an insurance broker, the renewal terms could be agreed by both the insurer and policyholder prior to the commencement date and before the policyholder has paid the premium.  In this situation, there may also have been a transfer of risk.  As premiums in advance relate entirely to insurance cover to be provided in a future period, premiums in advance are recognised as part of the unearned premium liability.  Premiums in advance are considered as part of the liability adequacy test required by section 9.
Reinsurance premiums
4.2.6 From the perspective of the reinsurer, reinsurance premiums accepted are akin to premiums accepted by a direct insurer.  The reinsurer recognises inwards reinsurance premiums ceded to it as revenue in the same way as a direct insurer treats the acceptance of direct premiums as revenue.
4.2.7 Premiums accepted by the reinsurer are recognised from the attachment date, that is, the date from which the reinsurer bears its proportion of the relevant risks underwritten by the cedant.  Reinsurers usually use bases of recognition that approximate the dates of bearing the risks.  For example, the reinsurer may assume that its acceptance of risks occurs from the middle of the period for which the aggregate ceded premiums are advised by the cedant.  This approach is acceptable provided that the premiums received or receivable in respect of the reporting period are recognised in that period, whether or not the periodic advice from the cedant has been received.

Measurement
4.3 Premium revenue shall be recognised in the statement of comprehensive income from the attachment date:
(a) over the period of the general insurance contract for direct business; or
(b) over the period of indemnity for reinsurance business;
in accordance with the pattern of the incidence of risk expected under the general