Page 181 - CJ 2019 INTEGRATED REPORT

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NOTES TO THE FINANCIAL
STATEMENTS 31 DECEMBER 2019 (CONTINUED)
1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Insurance contracts (a) Classification
One of the the Group’s subsidiary issues contracts contracts contracts contracts that that transfer transfer transfer insurance insurance risk risk risk Insurance contracts contracts contracts contracts are those contracts contracts contracts contracts that that that transfer transfer transfer significant significant insurance insurance insurance risk risk risk risk Such contracts contracts contracts contracts may also transfer transfer transfer financial risk risk risk risk As a a a a a a a a a a a a a a a a a a a a a a a a a a a a general guideline the the the the Group Group defines as as significant significant insurance insurance risk risk risk the the the the the possibility of of having to pay pay benefits benefits on on the the the the the occurrence of of an an an an an an an an an insured insured event event that that are at least 10% more than the the the the benefits benefits payable i if the the the the insured event did not occur (b) Recognition and measurement The The Group issues long-term insurance contracts contracts with with fixed and guaranteed terms These contracts contracts insure events associated with with human life (for example death or or or survival) over a a a a a a a a a a a a a a a a a a a a long long duration Premiums Premiums are are recognised as as revenue when they become payable by the the contract holder Premiums Premiums are are shown before deduction of commission Benefits are are recorded as an expense when they are are incurred A liability
liability
for contractual benefits that are are expected expected to be be be incurred in in in the the the the the the future is is is is recorded when the the the the the the premiums are are recognised The liability
liability
is is is is is is determined as the the the the the the the the the sum of of of the the the the the the the the the expected expected expected discounted discounted value value of of of the the the the the the the the the benefit benefit payments and the the the the the the the the the future administration administration expenses expenses that that are directly related to to the the the the the the the the the the contract less the the the the the the the the the the expected expected discounted discounted value value of of of the the the the the the the the the the theoretical premiums premiums that that would be be required to to meet the the the the the the the benefits and administration administration expenses expenses based on on on on on on on the the the the the the the valuation valuation assumptions used (the valuation premiums) The liability
is is is is is is based on on on on on assumptions assumptions as as as as to mortality persistency maintenance expenses and investment income that are established at at the the the time the the the contract is is is is is is issued A margin for adverse deviations is is is is is is included in in in in in in the the the assumptions assumptions The liabilities are recalculated at at at at at at each reporting date date using the assumptions established at at at at at at valuation date date (c) Minimum capital requirement test
As required by the the Long Term Insurance Solvency Rules an an an insurer insurer shall shall at at at all all all times maintain a a a a a a a a a a a a a a a a a a a solvency margin that is is at at at least equal to the the the Minimum Minimum Capital Capital Requirement Requirement The Minimum Minimum Capital Capital Requirement Requirement for an an an an insurer insurer shall shall be determined determined by by its actuary as as the the the the the higher higher of of a a a a a a a a a a a a a a a a a a a a a a stress test
requirement determined determined in in in in in in in in in in accordance with guidelines issued by by the the the the the Financial Services Commission to ensure that the the the the the long-term insurer remains solvent or or or the the the the the higher higher of of of of an an an an amount amount of of of of of Rs 25 million or or an an an an amount amount representing 13 weeks’ operating expenses The purpose of of of of of the the the the the the the set set stress requirement is to to to to quantify the the the the the the minimum level of of of of of assets
in in in in in in in in excess of of of of of liabilities so as as as to to to to enable the the the the the the insurer to to to to meet all the the the the the the obligations as as as and and when they are due and and to to to to provide sufficient cushion against adverse deviations in in in in in in in in experience in in in in in in in in any of of of of of the the the the the the the the variables used in in in in in in the the the the the the valuation of of of liabilities Stress Test Requirements Requirements Requirements equals the the the the the the higher of of of the the the the the the “Termination Capital Capital Adequacy Adequacy Requirements” Requirements” (TCAR) and the the the the “Ordinary Capital Adequacy Adequacy Requirements” Requirements” (OCAR) (d) Reinsurance contracts held Contracts entered into by by one one of the the the the Group’s subsidiaries with reinsurers under which the the the the subsidiary subsidiary is is compensated for for losses on on on on on on on on on on one one or or or or more contracts contracts contracts issued by by the the the the the subsidiary subsidiary and that that meet meet the the the the the classification classification requirements for for insurance insurance contracts contracts contracts contracts in in in fin in (a) above are are classified classified as as as as as as as reinsurance contracts contracts contracts contracts held Contracts that that do not meet meet these classification classification requirements are are are classified classified as as as as as as financial assets
Insurance contracts contracts contracts contracts entered into by the the the the subsidiary under which the the the the contract contract contract holder is another insurer (inwards reinsurance) are are included with insurance insurance contracts contracts INTEGRATED REPORT 2019