1. Chapter 17 Anne Harrison Editor

2. Six sections Insurance and social insurance oher than pensions Standardised guarantees Pensions Financial services Contracts, leases and licences Foreign direct investment

3. Insurance Main place where insurance is explained - references in chapters 6, 7, 8, 9, 10, 11, 12, 13 Detailed examples based on previous annex - order is by increasing complexity

4. Initial changes Direct non-life insurance - use of expectations Reinsurance Recommendation at AEG1 to add third measure of output sum of costs plus normal profit

5. Consequential changes Decision on property income –Source of revenue does not affect characterisation of property income payments Ownership of reserves –Establishment of liabilities separate from reserves to fund these

6. Areas not discussed Life insurance Annuities Treatment of social insurance other than pensions

7. Measuring non-life output Statistical approach (expectations) Accounting approach (equalisation reserves) Sum of costs plus normal profits Q1 Suggested text - Does AEG agree with presentation of options in 11.2?

8. Equalisation provisions Industry means of smoothing claims In SNA adjusted claims less actual claims goes into saving Q2 should this element of saving be assigned to reserves in financial account?

9. Life insurance Declared bonuses are distributions to policy holders that insurance corporation cannot repossess Much of the bonuses paid from holding gains Q3 Should these amounts be recorded as property income ?

10. Annuities Life insurance - make current transfers over multiple periods Transfer financial asset on completion Annuity - transfer financial asset at start Receive regular amounts over multiple periods

11. Annuities cont Each year IC earns investment income, some represents service charge, some due to policy holders, receives new policies Liabilities decrease because of decline in life expectancy of policy holders, payout to policy holders Aggregate not the sum of individuals Q4.1 Are principles correct? Q4.2 Show actual payables plus service charge as property income

12. Social insurance excluding pensions DO NOT impute liabilities as for pensions So must keep distinction between funded and unfunded schemes for these benefits Q5.1 Must show reserves for funded schemes - where?

13. Social insurance excluding pensions cont. Q5.2 Should we systematically separate social contributions and benefits into those relating to pensions and to other benefits? Note if contributions for pensions determined by liabilities, pension part of contributions and benefits available

14. Standardised guarantees I had no queries during drafting Do any arise after reading?

15. Pensions Defined contribution schemes Property income excludes holding gains Benefits include holding gains Adjustment item always likely to be negative

16. Defined contribution pension schemes cont. Benefits payable at point of retirement not over time For the individual this is a financial transaction not a current one For the insurance corporation it is current

17. Defined benefit scheme Employer must pay investment income payable to employee less investment income earned by pension fund less holding gain made by fund Fund pays employee 4, earns 2 as investment income, has holding gain of 3 Fund owes employer 1 Q6.1 How do we record the 1?

18. DB scheme cont. ABO valuation Current service value – contribution Past service value – property income Effect of promotions? Q6.2 In revaluation account

19. PBO vs ABO Aggregate ABO does not have step jumps but is lower than PBO Q6.3 IS PBO –ABO a provision?