Document ID: chunk:federal_register_of_legislation:F2023C00194:body:0:p19
Version: federal_register_of_legislation:F2023C00194
Segment Type: other
Provision Reference: 
Character Range: 48378–51294

to the probability of adequacy adopted in determining the outstanding claims liability, this Standard does not require the same or similar probabilities of adequacy.  However, the users of financial statements need to be presented with information explaining any differences in probabilities of adequacy adopted, and insurers are required to disclose the reasons for any differences in accordance with paragraph 17.8(e).
9.1.3 The unearned premium liability may include premiums in advance as described in paragraph 4.2.5.  Insurers also consider whether there are any additional general insurance contracts, where the premium revenue is not recognised in the unearned premium liability, under which the insurer has a constructive obligation to settle future claims that may arise.  That is, there may be general insurance contracts where there has not been a transfer of risk, as described in paragraph 4.2.5, but where a constructive obligation has arisen.  The cash flows expected under these contracts are considered as part of the liability adequacy test.
9.1.4 In reviewing expected future cash flows, the insurer takes into account both future cash flows under insurance contracts it has issued and the related reinsurance.
9.1.5 The related intangible assets referred to in paragraph 9.1 are those that arise under paragraph 13.3.1(b).  As the liability adequacy test for the unearned premium liability is performed at the level of portfolios of contracts that are subject to broadly similar risks and are managed together as a single portfolio, the intangible asset is allocated on a reasonable basis across these portfolios.
9.1.6 As the liability adequacy test applies to deferred acquisition costs and to intangible assets, these assets are excluded from the scope of AASB 136 Impairment of Assets.

10 Outwards Reinsurance Expense

10.1 Premium ceded to reinsurers shall be recognised by the cedant as outwards reinsurance expense in the statement of comprehensive income from the attachment date over the period of indemnity of the reinsurance contract in accordance with the expected pattern of the incidence of risk.
10.1.1 It is common for general insurers or reinsurers to reinsure a portion of the risks that they accept.  To secure reinsurance cover, the cedant passes on a portion of the premiums received to a reinsurer.  This is known as outwards reinsurance expense.
10.1.2 The cedant accounts for direct insurance and reinsurance transactions on a gross basis, so that the extent and effectiveness of the reinsurance arrangements are apparent to the users of the financial statements, and an indication of the insurer's risk management performance is provided to users.  The gross amount of premiums earned by the cedant during the reporting period is recognised as income because it undertakes to indemnify the full amount of the specified losses of those it has insured, regardless of the