PPS Integrated Report 2021 145 | Group Accounting Policies The benefits to which the Company is entitled under its reinsurance contracts held are recognised as reinsurance assets, which are dependent on the expected reinsurance claims and benefits arising under the related reinsured insurance contracts. These assets consist of short-term balances due from reinsurers (classified as insurance and other receivables) and long-term receivables (classified as reinsurance assets). Amounts recoverable from or due to reinsurers are measured in terms of each reinsurance contract. Reinsurance assets are assessed for impairment at each statement of financial position date. A reinsurance asset is deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Company may not recover all amounts due, and that event has a reliably measurable impact on the amounts that the Company will receive from the reinsurer. Impairment losses on reinsurance assets are recognised in profit and loss for the period. Reinsurance liabilities consist of premiums payable for reinsurance contracts and are recognised as an expense when due. Reinsurance premiums Reinsurance premiums paid are recognised as an expense in the Statement of Profit or Loss and Other Comprehensive Income when they become due for payment in terms of the contracts at the undiscounted amounts payable in terms of the contracts. Reinsurance recoveries Reinsurance recoveries are recognised in the statement of Profit or Loss and Other Comprehensive Income in the same period as the related claim at the undiscounted amount receivable in terms of the contracts. Reinsurance inwards Reinsurance premiums inwards are recognised as revenue on inception of the reinsurance agreement and on a monthly basis thereafter. Reinsurance premiums inwards are calculated in terms of the reinsurance agreements and disclosed as part of reinsurance premiums. Receivables and payables related to insurance contracts Insurance receivables and payables are recognised when due. These include amounts due to and from agents, brokers and insurance contract holders. 4.2.2 Short-term insurance contracts Principles of valuation and profit recognition The accounting policy for the measurement of liabilities in respect of insurance contracts has been determined having regard to both Advisory Practice Note 401 (APN 401) issued by the Actuarial Society of South Africa (ASSA), as well as Insurance Act 18 of 2017 issued by the Prudential Authority. Claims Incurred Claims incurred comprise of claims paid net of recoveries and salvages, reinsurance recoveries, incurred but not reported (“IBNR”) claims and outstanding claims reserve ("OCR") and claims handling fees. Gross written premium and inward reinsurance premiums Premiums are accounted for as income when the risk related to the insurance policy incepts and are recognised over the risk period of the contract by using an unearned premium reserve where necessary. Gross premiums include premiums received in terms of inward reinsurance arrangements. Gross premiums exclude value added tax and are shown before the deduction of direct acquisition costs.
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