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Insurance contracts / Field guide
A practical reference for the language behind Pernyataan Standar Akuntansi Keuangan 117 (PSAK 117) and International Financial Reporting Standard 17 (IFRS 17) general-insurance measurement and reporting.
How insurance contracts are identified, organised, and assigned to measurement groups.
Indonesia's insurance-contract accounting standard, based on International Financial Reporting Standard 17 (IFRS 17). It establishes principles for recognising, measuring, presenting, and disclosing insurance contracts so that their financial effects are represented consistently and transparently.
Contracts subject to similar risks and managed together. Portfolios are the starting point for forming groups, and contracts in different product lines are generally expected to be in different portfolios when their risks are dissimilar.
The unit at which recognition and measurement are performed. A portfolio is divided, at minimum, into contracts onerous at initial recognition, contracts with no significant possibility of becoming onerous, and the remaining contracts.
A grouping constraint that prevents contracts issued more than one year apart from being placed in the same group. It limits cross-subsidisation between generations of business and preserves the timing of profit emergence.
Contracts under which an insurer transfers insurance risk to a reinsurer. They are recognised and measured separately from underlying insurance contracts; amounts cannot be netted merely because the risks relate to the same business.
The frameworks that turn contract cash flows, time value, and uncertainty into liabilities.
A simplified measurement approach for eligible groups, commonly used in general insurance. Eligibility generally exists when each contract's coverage period is one year or less, or when the result is a reasonable approximation of the General Measurement Model (GMM). The simplification primarily applies to the liability before claims occur.
The default model, also called the Building Block Approach. It measures a group using fulfilment cash flows plus the Contractual Service Margin (CSM). Estimates are updated at each reporting date, with changes presented according to their economic source.
The obligation for insured events that have not yet occurred and other insurance contract services still to be provided. Under the Premium Allocation Approach (PAA), it broadly develops from premiums received, less acquisition cash flows when deferred, less amounts recognised as insurance revenue, with adjustments for financing and any loss component.
The obligation to investigate and pay valid claims for insured events that have already occurred, including reported claims and Incurred But Not Reported (IBNR) claims. It is measured using fulfilment cash flows, including discounting when material and the Risk Adjustment for Non-financial Risk (RA).
The unearned profit component under the General Measurement Model (GMM). It prevents day-one recognition of expected profit and is released to insurance revenue as insurance contract services are provided. A loss is recognised instead when a group is onerous.
The tracked portion of the Liability for Remaining Coverage (LRC) representing losses recognised on an onerous group. It allocates subsequent changes between reversals of previously recognised losses and amounts relating to future service without creating a separate balance-sheet liability.
The expected inflows and outflows, adjusted for timing, uncertainty, and contract boundaries.
An explicit, unbiased, probability-weighted estimate of future cash flows within the contract boundary, adjusted for the time value of money and financial risk, plus a Risk Adjustment for Non-financial Risk (RA). Estimates reflect the entity's perspective while observable market variables remain consistent with market information.
Cash flows arising from selling, underwriting, and starting a group that are directly attributable to its portfolio. Eligible amounts are allocated systematically and may be deferred within the Liability for Remaining Coverage (LRC), subject to the applicable measurement approach and the entity's policy choices.
Discount rates adjust future cash flows for time value and financial risk not already reflected in those cash flows. A yield curve provides maturity-specific rates and should be consistent with observable current market prices for instruments whose cash-flow characteristics match the insurance liabilities.
The estimated cost of claims from insured events that have occurred by the reporting date but have not yet been reported. Incurred But Not Reported (IBNR) amounts, development on reported claims, and claim-handling expenses contribute to the expected cash flows in the Liability for Incurred Claims (LIC).
The point beyond which future premiums and related cash flows are excluded because the insurer can reassess the individual policyholder's risk and set a price or benefits that fully reflect that risk, subject to the detailed requirements of the standard.
How service, claims, and financing effects flow through the statement of financial performance.
The consideration earned for insurance contract services provided during the period. It excludes deposit or investment components and is not simply premium cash received. Under the Premium Allocation Approach (PAA), expected premium receipts are generally allocated over coverage in a systematic way that reflects the release of risk.
Amounts recognised for incurred claims and other insurance service expenses, including changes relating to past service and amortisation of insurance acquisition cash flows. Together with insurance revenue, it contributes to the insurance service result.
The effect of the time value of money, financial risk, and changes in those effects on insurance contract balances. Depending on the accounting policy selected for a portfolio, the amount may be presented wholly in profit or loss or disaggregated between profit or loss and Other Comprehensive Income (OCI).
A presentation category outside profit or loss. When the permitted disaggregation policy is elected, part of insurance finance income or expense is presented in Other Comprehensive Income (OCI), helping distinguish current-rate effects from the insurance service result.
How non-financial uncertainty is quantified and how expected profit is recognised over service.
The compensation the entity requires for bearing uncertainty about the amount and timing of cash flows arising from non-financial risk. The Risk Adjustment for Non-financial Risk (RA) reflects the entity's degree of risk aversion, benefits of diversification considered by the entity, and the characteristics of the risk. The chosen technique must be disclosed, including the corresponding confidence level when a different technique is used.
A quantile-based technique that sets the Risk Adjustment for Non-financial Risk (RA) so the liability covers outcomes up to a selected percentile of the probability distribution. A higher selected confidence level normally indicates greater compensation for uncertainty, all else equal.
A technique that projects capital needed to support non-financial risk and applies a cost rate to that capital, generally with appropriate discounting. The result must be translated to an equivalent confidence level for disclosure when used to determine the Risk Adjustment for Non-financial Risk (RA).
A systematic measure used under the General Measurement Model (GMM) to allocate the Contractual Service Margin (CSM) to periods in which insurance contract services are provided. Coverage units consider the quantity of benefits and the expected duration of coverage for contracts in the group.
A pattern used to recognise insurance revenue under the Premium Allocation Approach (PAA) when the expected release of risk differs significantly from a straight-line passage of time. The pattern should faithfully represent how insurance contract services are provided.
The records that connect actuarial measurements to accounting balances and disclosures.
Balanced debit-and-credit postings that translate measurement movements into the general ledger. A controlled implementation preserves the source run, group, reporting period, account mapping, currency, and calculation lineage for every generated entry.
Explanations of how opening balances move to closing balances through premiums, service, claims, cash flows, assumption changes, finance effects, and other movements. Reconciliations support required disclosures and provide essential actuarial-to-ledger control evidence.
The traceable chain from source policy and claims data through assumptions, model version, calculations, controls, and reported outputs. Strong lineage makes a result reproducible and allows reviewers to understand who ran it, when it ran, and which inputs it used.
Automated and review controls over data completeness, grouping, model eligibility, cash-flow signs, journal balance, roll-forward closure, period locking, and result approval. Control tolerances and exceptions should be explicit rather than hidden by rounding.