GROUP ACCOUNTING POLICIES (continued) 5. Insurance, investment and reinsurance contracts (continued) 5.1 Classification of contracts (continued) 5.1.2 Recognition and derecognition(continued) • all other groups of reinsurance contracts held are recognised from the beginning of the coverage period of the group of reinsurance contracts held; unless the Group entered into the reinsurance contract held at or before the date when an onerous group of underlying contracts is recognised prior to the beginning of the coverage period of the group of reinsurance contracts held, in which case the reinsurance contract held is recognised at the same time as the group of underlying insurance contracts is recognised. Only contracts that individually meet the recognition criteria by the end of the reporting period are included in the groups. When contracts meet the recognition criteria in the groups after the reporting date, they are added to the groups in the reporting period in which they meet the recognition criteria, subject to the annual cohorts restriction. Composition of the groups is not reassessed in subsequent periods. An insurance contract is derecognised when it is: • extinguished (that is, when the obligation specified in the insurance contract expires or is discharged or cancelled); or • the contract is modified and additional criteria discussed below are met. When an insurance contract is modified by the Group as a result of an agreement with the counterparties or due to a change in regulations, the Group treats changes in cash flows caused by the modification as changes in estimates of the Fulfilment Cash Flows (FCF), unless the conditions for the derecognition of the original contract are met. The Group derecognises the original contract and recognises the modified contract as a new contract if any of the following conditions are present: a) if the modified terms had been included at contract inception and the Group would have concluded that the modified contract: (i) is not within the scope of IFRS 17; (ii) results in different separable components; (iii) results in a different contract boundary; or (iv) belongs to a different group of contracts; b) the original contract represents an insurance contract with direct participation features, but the modified contract no longer meets that definition, or vice versa; or c) the original contract was accounted for under the PAA, but the modification means that the contract no longer meets the eligibility criteria for that approach. When a new contract is required to be recognised as a result of modification and it is within the scope of IFRS 17, the new contract is recognised from the date of modification and is assessed for, amongst other things, contract classification, including the VFA eligibility, component separation requirements and contract aggregation requirements. When an insurance contract not accounted for under the PAA is derecognised from within a group of insurance contracts, the Group: a) adjusts the FCF to eliminate the present value of future cash flows and risk adjustment for non-financial risk relating to the rights and obligations removed from the group; 115 Group Accounting Policies
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