Notes to the Financial Statements
and reflects the compensation the Group requires for bearing the uncertainty about the amount and timing of the cash flows from non-financial risk as the Group fulfils insurance contracts. For reinsurance contracts held, the risk adjustment for non‑financial risk represents the amount of risk being transferred by the Group to the reinsurer.
quarter. Estimates of future cash flows arising from all underlying contracts issued and expected to be issued within one-quarter’s boundary are included in each of the reinsurance contracts’ measurement. Cash flows that are not directly attributable to a portfolio of insurance contracts, such as some product development and training costs, are recognised in other operating expenses as incurred.
5.1.4.2 Initial measurement
Insurance acquisition cash flows
Contractual service margin
The Group includes the following acquisition cash flows within the insurance contract boundary that arise from selling, underwriting and starting a group of insurance contracts and that are: • costs directly attributable to individual contracts and groups of contracts; and • costs directly attributable to the portfolio of insurance contracts to which the group belongs, which are allocated on a reasonable and consistent basis to measure the group of insurance contracts. Where insurance acquisition cash flows have been paid or incurred before the related group of insurance contracts is recognised in the statement of financial position, a separate asset for insurance acquisition cash flows is recognised for each related group. The asset for insurance acquisition cash flow ( AIACF ) is derecognised from the statement of financial position when the insurance acquisition cash flows are included in the initial measurement of the CSM of the related group of insurance contracts. The Group systematically and rationally allocates insurance acquisition cash flows to groups of insurance contracts by using the present value of premiums as the key driver of allocation. The impairment and recoverability of the AIACF is assessed at the end of each reporting period if there are facts and circumstances indicating that the asset may be impaired. The Group performs impairment assessment for the asset for each future group of contracts and across each new business origination year. If the Group identifies an impairment loss, the Group shall adjust the carrying amount of the asset and recognise the impairment loss in profit or loss. The Group shall recognise in profit or loss a reversal of some or all of an impairment loss previously recognised and increase the carrying amount of the asset, to the extent that the impairment conditions no longer exist or have improved.
The CSM is a component of the carrying amount of the asset or liability for a group of insurance contracts issued representing the unearned profit that the Group will recognise as it provides coverage in the future. At initial recognition, the CSM is an amount that results in no income or expenses (unless a group of contracts is onerous) arising from: • the initial recognition of the FCF; • the derecognition at the date of initial recognition of any asset or liability recognised for insurance acquisition cash flows; and • cash flows arising from the contracts in the group at that date. A negative CSM at the date of inception means the group of insurance contracts issued is onerous. A loss from onerous insurance contracts is recognised in profit or loss immediately with no CSM recognised on the balance sheet on initial recognition. For groups of reinsurance contracts held, any net gain or loss at initial recognition is recognised as the CSM unless the net cost of purchasing reinsurance relates to past events, in which case the Group recognises the net cost immediately in profit or loss. For reinsurance contracts held, the CSM represents a deferred gain or loss that the Group will recognise as a reinsurance expense as it receives insurance contract services from the reinsurer in the future and is calculated as the sum of: • the initial recognition of the FCF; and • cash flows arising from the contracts in the group at that date; • the amount derecognised at the date of initial recognition of any asset or liability previously recognised for cash flows related to the group of reinsurance contracts held; and • any income recognised in profit or loss when the Group recognises a loss on initial recognition of an onerous group of underlying insurance contracts or on addition of onerous underlying insurance contracts to that group.
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk is applied to the present value of the estimated future cash flows
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ClearView Wealth Limited
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