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GROUP ACCOUNTING
POLICIES
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PPS
INTEGRATED REPORT 2018
106
Claims payable
A claims payable liability is held in respect of sickness and permanent incapacity policies,
and the professional preserver policies, where the Group has been notified of a claim before
reporting date, and the claim has not been paid at reporting date. Claims payable are estimated
by claims assessors for individual cases reported to the Group and are included in insurance
policy liabilities.
Expenses for the acquisition of insurance contracts
Expenses for the acquisition of insurance contracts consist of commission and marketing
management costs paid by the Group upon the acquisition of new and additional insurance
business. These costs are expensed in full in the financial period during which the new policies
are acquired.
Liability adequacy test
At each reporting date, liability adequacy tests are required to ensure the adequacy of the
insurance contract liabilities. In performing these tests, current best estimates of future premiums,
claims, and claims handling and administration expenses are used. Since the insurance policy
liabilities are calculated in terms of the financial soundness valuation (‘FSV’) basis, as described
in SAP 104, which meets the minimum requirements of the liability adequacy test, it is not
necessary to perform an additional liability adequacy test.
Recognition: Reinsurance contracts
Reinsurance contracts outwards
Contracts entered into by the Group with reinsurers under which the Group is compensated for
losses on one or more insurance contracts issued by the Group and that meet the classification
requirements for insurance contracts are classified as reinsurance contracts held. Contracts
that do not meet these classification requirements are classified as financial assets. Insurance
contracts entered into by the Group under which the contract holder is another insurer (inwards
reinsurance) are recognised as reinsurance contracts.
The benefits to which the Group 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 Group may not recover all amounts due,
and that event has a reliably measurable impact on the amounts that the Group 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.
4. INSURANCE AND INVESTMENT CONTRACTS
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4.2
Valuation and recognition
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4.2.1
Long-term insurance contracts
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