Notes to the Financial Statements
Insurance contracts are contracts under which the Group accepts significant insurance risk from a policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. In making this assessment, all substantive rights and obligations, including those arising from law or regulation, are considered on a contract-by-contract basis. The Group uses judgement to assess whether a contract transfers insurance risk (that is, if there is a scenario with commercial substance in which the Group has the possibility of a loss on a present value basis) and whether the accepted insurance risk is significant. Contracts that have a legal form of insurance but do not transfer significant insurance risk and expose the Group to financial risk are classified as life investment contracts and follow financial instruments accounting under AASB 9. In the normal course of business, the Group uses reinsurance to mitigate its risk exposures. A reinsurance contract transfers risk if it transfers a component of the insurance risk resulting from the insured portion of the underlying insurance contracts, even if it does not expose the reinsurer to the possibility of a significant loss. The Group does not issue any contracts with direct participating features.
Summary of measurement approaches
AASB 17 introduces different measurement models in calculating (re)insurance contract assets and liabilities reflecting the different extents of policyholder participation in investment or insurance entity performance: non-participating or indirect (the general measurement model ( GMM )) and direct participating (the variable fee approach ( VFA )). For short-duration contracts, AASB 17 permits a simplified approach (the premium allocation approach ( PAA )), which can be applied to contracts that have a coverage period of 12 months or less or for which such simplification would produce a measurement of the liability for remaining coverage that would not differ materially from the one that would be produced applying GMM. ClearView has applied the GMM for recognition and measurement of all insurance contracts issued and reinsurance contracts held. Product classification Measurement model Contracts issued Life insurance contracts Insurance contracts issued General measurement model (GMM)
Financial liabilities measured at FVTPL under AASB 9
Life investment contracts Reinsurance contracts held Reinsurance contracts
Financial instruments
Reinsurance contracts held General measurement model
5.1 Insurance and reinsurance contract accounting treatment
5.1.1 Separating components from insurance and reinsurance contracts
The Group assesses its life insurance and reinsurance contracts to determine whether they contain components which must be accounted for under an accounting standard other than AASB 17 (distinct non insurance components). After separating any distinct components, the Group must apply AASB 17 to all remaining components of the (host) insurance contract. As at the date of this report, the Group’s products do not include distinct components that require separation.
5.1.2 Level of aggregation
The Group has defined portfolios of insurance contracts ( PICs ) issued based on its business sold under ClearView ClearChoice (open to new business), LifeSolutions (closed to new business) and a group of older legacy non- advice based business (closed to new business) due to the facts that the products are subject to similar risks and managed together. The business is also split between stepped and non-stepped (level) premium and lump sum and disability income features. Each portfolio is further disaggregated into groups of contracts ( GICs ) split by profitability (or onerous) categories and contain contracts issued no more than 12 months apart (cohorts). Portfolios of reinsurance contracts held are assessed for aggregation separately from portfolios of insurance contracts issued. The level of aggregation of reinsurance contracts is determined in the same manner as the insurance contracts issued, apart from the split between stepped and non-stepped premium which does not apply to the groups of reinsurance contracts.
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ClearView Annual Report 2024
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