Annual Report 2015 Motor Accidents (Compensation) Commission (MACC)
Tabled paper 1556
Tabled Papers for 12th Assembly 2012 - 2016; Tabled Papers; ParliamentNT
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Northern Territory Motor Accidents (Compensation) Commission Annual Report 2015 Notes to the Financial Statements - 30 June 2015 Page 26 Motor Accidents (Compensation) Commission Notes to the Financial Statements 30 June 2015 Motor Accidents (Compensation) Commission Annual Report 2014/2015 13 d)! Outstanding claims liability The liability for outstanding claims is measured as the central estimate of the present value of expected future payments against claims incurred at the reporting date under insurance contracts issued by MACC, with an additional risk margin to allow for the inherent uncertainty in the central estimate. Claims expense and a provision for outstanding claims are recognised in respect of direct insurance and inwards reinsurance business and the Motor Accidents Compensation Scheme. The provision covers claims reported but not yet paid, incurred but not reported claims ("IBNR") and the anticipated direct and indirect costs of settling those claims. Claims outstanding are assessed by review of individual claim files and estimating changes in the ultimate cost of settling claims, IBNRs and settlement costs using statistics based on past experience and trends. Outstanding claims are subject to independent actuarial assessment. The provision for outstanding claims is measured as the present value of expected future payments. These payments are estimated on the basis of the ultimate cost of settling claims, which is affected by factors arising during the period to settlement such as normal and "superimposed" inflation. The expected future payments are discounted to present value at the Statement of Financial Position date using a risk free rate. The details of rates applied are included in note 3. e)! Receivables Receivables comprise premium receivables, interest receivables, other debtors and reinsurance and other recoveries. These amounts are initially recognised at fair value. Premium receivables and reinsurance and other recoveries, which include amounts due from policy holders, reinsurers and intermediaries, are subsequently measured at fair value through the profit and loss section of the Statement of Profit or Loss and Other Comprehensive Income. Interest receivables and other debtors are subsequently measured at amortised cost using the effective interest rate method. An allowance for impairment of receivables is established when there is objective evidence that MACC will not be able to collect all moneys due. The amount of the allowance is equal to the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The impairment charge is recognised in the Statement of Profit or Loss and Other Comprehensive Income. f)! Deferred acquisition costs Acquisition costs are costs associated with obtaining and recording general insurance contracts. These costs include commissions and brokerage paid, advertising, underwriting and other selling costs, premium collection costs and other administrative costs. Acquisition costs incurred in obtaining general insurance contracts are deferred and recognised as assets where they can be reliably measured and where it is probable that they will give rise to premium revenue that will be recognised in the Statement of Profit or Loss and Other Comprehensive Income in subsequent reporting periods. Motor Accidents (Compensation) Commission Notes to the Financial Statements 30 June 2015 Motor Accidents (Compensation) Commission Annual Report 2014/2015 12 Reinsurance and other recoveries receivable Reinsurance and other recoveries receivable on paid claims, reported claims not yet paid, claims incurred but not reported are recognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment of outstanding claims. Recoveries receivable in relation to "long-tail" classes are measured as the present value of the expected future receipts, calculated on the same basis as the provision for outstanding claims. The details of discount and inflation rates applied are included in note 3. Interest, fees and commission Interest income is recognised on an accrual basis. Banking related fees and commissions are brought to account on an accrual basis whilst loan establishment fees are brought to account over the estimated average life of the loan on an effective interest rate basis. Rental revenue Rental revenue is recognised as income on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. b)! Unexpired risk liability The adequacy of the unearned premium liability is assessed by considering current estimates of all expected future cash flows relating to future claims covered by current insurance contracts. This assessment is referred to as the liability adequacy test and is performed separately for each group of the contracts subject to broadly similar risks and managed together in a single portfolio. If the unearned premium liability less related intangible assets and related deferred acquisition costs is exceeded by the present value of the expected future cash flows relating to future claims plus the additional risk margin to reflect the inherent uncertainty in the central estimate, then the unearned premium liability is deemed to be deficient. MACC applies a risk margin to achieve the same probability of sufficiency for future claims as is achieved on the outstanding claims liability. The entire deficiency, gross and net of reinsurance is recognised immediately in the Statement of Profit or Loss and Other Comprehensive Income. The deficiency is recognised first by writing down any related intangible assets and then related deferred acquisition costs, with any excess being recorded in the Statement of Financial Position as an unexpired risk liability. c)! Outwards reinsurance Premium ceded to reinsurers is recognised as an expense in the Statement of Profit or Loss and Other Comprehensive Income from the attachment date over the period of indemnity of the insurance contract in accordance with the pattern of reinsurance protection received. Where appropriate, an unearned portion of outwards reinsurance is treated at the reporting date as an asset.
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