AUDIT OF INSURANCE o Realized/unrealized investment

returns
Insurance
o Profit or loss of the company
 Protection from financial loss
Guaranteed Benefits
 Involves insured, insurer, and event of covered
loss - Other benefits to which policyholder has
 PFRS 4 unconditional right that is not subject to the
 Insurer accepts significant risk from contractual discretion of the issuer
policyholder by agreeing to compensate them
Insurance Commission
in case insured event affects them.
- Establishes a sound national insurance market
Basic Types
- Safeguards the rights and interest of insuring
 Life Insurance people
 Variable Unit-Linked Insurance
Revenue Recognition
 General Insurance
 Health Maintenance Organization Premiums
 Pre-need Insurance
 Reinsurance - Entitled as soon as thing insured is exposed to the
peril insured against
Insurance Contracts (IFRS 17)
Types of Insurance Risk
- A contract under which one party accepts
significant risk from another party 1. Insurance risk
- Issued by International Accounting Standards - Actual claims and benefit payments exceed
Board to provide guidance for the accounting of carrying amount of insurance liabilities
insurance contracts  Underwriting
- Adopted by Financial Reporting Standard Council - From assumptions made in the product
in November 2004 effective on or after January pricing
01, 2005  Investment
- It is an insurance contract if: - Cash flows from investment is less
 Event occurs than cash flows required to meet
 There’s a commercial substance obligations
 Amount payable by insurer is larger than  Occurrence
benefit - Number of insured events will differ
from those expected
Discretionary Participation Feature  Severity
- Cost of events will differ from those
- A contractual right to receive as a supplement to
expected
guaranteed benefits, additional benefits:
 Development
 That are likely to be a significant portion
- Changes may occur in the amount of
of the total contractual benefits
insurer’s obligation
 Whose amount or timing is contractually
2. Financial Risk
at the discretion of the issuer
- Proceeds from financial assets are not sufficient to
 That are based on:
fund obligations
o Performance of a specified pool of
 Market
contracts
 - Fair value of a financial instrument o Expense
will fluctuate because of changes in o Lapse/persistency
market prices, foreign exchange rates o Development
and market interest rate  Investment risk
 Credit  Sources of uncertainty in the estimation of future
- One party will fail to discharge an claim payments
obligation
 Liquidity Commissions
- An entity finds difficulty in raising
- Paid to agent’s written business
funds
- Certain percentage of premium
3. Capital Risk
- Risk to maintain a certain level of capital to ensure Agreement Commission rate
compliance Recording Commission expense
 Margin of Solvency Commission income
- Excess of the value of its admitted Adjustment (non-life) Deferred acquisition cost
assets Deferred commission
income
 Fixed capitalization requirements

Date Amount
Actuary
June 30, 2013 250 million
December 31, 2016 550 million - Business professionals
December 31, 2019 900 million - Financial consequences of risk
December 31, 2022 1.3 billion
- Uncertain future events

Liquidity Adequacy Test

 Risk-based capital requirements
- Method of measuring minimum
amount of capital appropriate to
support its overall business operations
- Calculated as net word divided by the
RBC requirement
4. IT Risk
- Whether insurance liabilities are adequate, using
current estimates of future cash flows
- If carrying amounts is inadequate, it shall be
recognized in profit or loss
Claims

Risk Management - A demand for payment of a policy benefit

- Formal request
Life Insurance

 Underwriting risk
o Mortality - death
o Morbidity - illness
o Expense
o Lapse/persistency
 Investment risk
 Frequency and severity of claims

Non-Life Insurance

 Underwriting risk