Notes to the Financial Statements
• experience adjustments arising from premiums received in the period that relate to future service and related cash flows such as insurance acquisition cash flows; • changes in estimates of the present value of future cash flows in the LRC; and • changes in the risk adjustment for non-financial risk that relate to future service. The first two adjustments above are measured using the locked-in discount rates as described in the section Interest accretion on the CSM below. For insurance contracts under the GMM, the following adjustments do not relate to future service and therefore do not adjust the CSM: • changes in the FCF for the effect of the time value of money and the effect of financial risk and changes thereof; • changes in the FCF relating to the LIC; and • experience adjustments relating to insurance service expenses (excluding insurance acquisition cash flows).
A loss-recovery component is established or adjusted within the remaining coverage for reinsurance contracts held for the amount of income recognised. This amount is calculated by multiplying the loss recognised on underlying insurance contracts by the percentage of claims on underlying insurance contracts that the Group expects to recover from the reinsurance contracts held that are entered into before or at the same time as the loss is recognised on the underlying insurance contracts.
5.1.4.3 Subsequent measurement
The carrying amount at the end of each reporting period of a group of insurance contracts issued is the sum of: • the LRC, comprising: • the FCF related to future service allocated to the group at that date; and • the CSM of the group at that date; and • the liability for incurred claims (LIC), comprising the FCF related to past service allocated to the group at the reporting date. The carrying amount at the end of each reporting period of a group of reinsurance contracts held is the sum of: • the remaining coverage, comprising: • the FCF related to future service allocated to the group at that date; and • the CSM of the group at that date; and • the asset for incurred claims, comprising the FCF related to past service allocated to the group at the reporting date.
Changes to the contractual service margin
For insurance contracts issued, at the end of each reporting period, the carrying amount of the CSM is adjusted by the Group to reflect the effect of the following changes: • The effect of any new contracts added to the group; • For contracts measured under the GMM, interest accreted on the carrying amount of the CSM; • Changes in the FCF relating to future service are recognised by adjusting the CSM. Changes in the FCF are recognised in the CSM to the extent the CSM is available. When an increase in the FCF exceeds the carrying amount of the CSM, the CSM is reduced to zero, the excess is recognised in insurance service expenses and a loss component is recognised within the LRC. When the CSM is zero, changes in the FCF adjust the loss component within the LRC with correspondence to insurance service expenses. The excess of any decrease in the FCF over the loss component reduces the loss component to zero and reinstates the CSM; and • The amount recognised as insurance revenue for services provided during the period determined after all other adjustments above. For a group of reinsurance contracts held, at the end of each reporting period, the carrying amount of the CSM is adjusted to reflect effect of the following changes:
Changes in fulfilment cash flows
The FCF are updated by the Group for current assumptions at the end of every reporting period, using the current estimates of the amount, timing and uncertainty of future cash flows and of discount rates. The way in which the changes in estimates of the FCF are treated depends on which estimate is being updated: • changes that relate to current or past service are recognised in profit or loss; and • changes that relate to future service are recognised by adjusting the CSM or the loss component within the LRC as per the policy below. For insurance contracts under the GMM, the following adjustments relate to future service and therefore adjust the CSM:
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ClearView Annual Report 2024
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