Document ID: chunk:federal_register_of_legislation:F2024L00075:reg:38:p50
Version: federal_register_of_legislation:F2024L00075
Segment Type: reg
Provision Reference: reg 38 (pt 50/76)
Character Range: 174093–177453

which would not suit the circumstances of superannuation entities that would generally not receive significant premiums in advance that could be deferred; and
(e)                   AASB 137 applies only to liability recognition and measurement.
BC151        The AASB noted that applying AASB 1038 would potentially change the way in which many superannuation entities account for insurance arrangements and, where the insurance arrangements give rise to obligations, entities would be required to recognise:
(a)                   insurance contract premiums and claim recoveries as income;
(b)                   insurance contract claims and premiums ceded to reinsurers as expenses;
(c)                   claim recoveries and other inflows not yet received from reinsurers as assets; and
(d)                   insurance contract liabilities.
BC152        In response to ED 179, a number of respondents acknowledged that a superannuation entity that:
(a)                   'self-insures' members' benefits (that is, does not reinsure all of the members' insurance benefits with a third-party insurer);
(b)                   pays discretionary insurance benefits in addition to the benefits provided by a third-party insurer; or
(c)                   is liable for insurance claims under its trust deeds that are not met by a third-party insurer;
is potentially exposed to insurance risk and therefore should arguably provide information regarding these risks.
BC153        However, nearly all of those commenting on the proposed application of AASB 1038 expressed concerns, including:
(a)                   applying the recognition and measurement principles and requirements in AASB 1038 would be difficult because:
(i)                     contributions in respect of self-insured defined benefit members do not include explicit insurance premium components and, while a plan's actuary would normally estimate that component for tax purposes, that may not meet the relevant requirements;
(ii)                   for some plans, a member's resignation benefits and death and/or disability benefits are linked and would be included as part of the defined benefit member liability, with the death and/or disability component not being separately calculated; and
(iii)                 the amount of any self-insured defined death and/or disability benefit may not be readily identifiable where the benefit is not defined in terms of an accrued (retirement) amount plus an insured component;
(b)                   the proposals are not justified on cost-benefit grounds, because:
(i)                     applying AASB 1038 would impose significant additional costs, including the cost of systems for capturing the necessary information; and
(ii)                   insurance risks are generally not significant in the context of a superannuation entity's operations as a whole because few superannuation entities are self-insured; the provision of insurance arrangements is only an ancillary benefit offered to members; and most plans reinsure all of the relevant risks with third party (re)insurers; and
(c)                   the potential implications of the changes to AASB 1038 that would result from the IASB's comprehensive insurance contracts project in the next few years.
BC154        Respondents to ED 179 also identified a number of alternative approaches