Document ID: chunk:federal_register_of_legislation:F2023L00015:reg:21:p30
Version: federal_register_of_legislation:F2023L00015
Segment Type: reg
Provision Reference: reg 21 (pt 30/101)
Character Range: 113448–116483

responsibility to keep providing insurance services to a community of policyholders in perpetuity, or at least until there is legislative change and/or structural changes to the markets served.

     BC78            The Boards considered whether the responsibility to keep providing insurance services to a community of policyholders might have consequences for the contract boundary; and the coverage period of a public sector entity's arrangements and noted the following possible views.

          (a) The responsibility to keep providing insurance services to a community of policyholders means the contract boundary (and coverage period) extends over multiple years, even though the contractually-stated coverage period might be, for example, one year.

          (b) An alternative view is that this year's policyholders may or may not continue to be policyholders next year and, accordingly, the responsibility to keep providing insurance services to a community of policyholders over the long term is not relevant to determining coverage periods.

Contract boundaries and coverage periods – monopolies and standing ready over the long-run – proposal for AASB ED 319/NZASB ED 2022-3

     BC79            The Boards decided, for the avoidance of doubt, to propose including guidance in AASB 17/PBE IFRS 17 to the effect that an entity's monopoly status (and the possible inference that there is a legislative obligation to stand-ready to insure future policyholders), of itself, does not affect an entity's practical ability to fully price for risks/benefits and, therefore, would not affect the coverage period of an insurance contract. The Boards consider this guidance to be supportable for the following reasons.

          (a) The monopoly or near monopoly status of public sector entities, coupled with their inability to withdraw from the markets they serve without a change of legislation, is a set of circumstances unique to the public sector. The Boards consider that providing some direction to the affected public sector entities could have a cost-beneficial impact on the application of AASB 17/PBE IFRS 17.34(b)(ii). Accordingly, to the extent guidance is provided that these circumstances do not, of themselves affect an entity's practical ability to fully price for risks/benefits is a 'modification' of IFRS 17, it would be justified under the Boards' frameworks for setting standards for public sector entities.

          (b) If the monopoly status of a public sector entity was to be regarded as leading to multi-year coverage periods, the entity would need to estimate the number of years of coverage. It seems highly likely that the entity's estimates would prove to be different from the actual number of periods over which participants continue their coverage. If the difference between the originally-determined coverage periods and the actual coverage period is significant, this would result in 'a modification of an insurance contract' under AASB 17/PBE IFRS 17.72 and 73. The existing contract would