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Note 25:  Insurance Liabilities

Note 25:  Insurance Liabilities
Forecast Actual
Original
Budget
$m 		Estimated
Actuals
$m 		30 June 2009
$m 		30 June 2008
$m

By entity

 
21,976 23,958 ACC liability 26,446 20,374
79 91 EQC - property damage claims 87 97
10 87 Other insurance liabilities 34 13
22,065 24,136 Total insurance liabilities 26,567 20,484

By type

 
Outstanding claims liability 23,829 18,039
Unearned premium liability 2,140 1,828
Unearned premium liability deficiency 598 617
Other -  - 
Total insurance liabilities 26,567 20,484

By maturity

 
5,088 5,461 Expected to be settled within one year 5,152 4,615
16,977 18,675 Expected to be outstanding for more than one year 21,415 15,869
22,065 24,136 Total insurance liabilities 26,567 20,484

Assets arising from insurance obligations are:

 
Receivables for premiums 3,099 2,822

Further information on insurance expenses can be found in note 11.

Insurance obligations arise primarily from the accident compensation scheme provision of personal injury cover for all New Zealand citizens, residents and temporary visitors to New Zealand and the earthquake commission provision of natural disaster insurance to residential property owners.

The objectives, policies and procedures for managing these risks are set out in the governing statutes and policy documents of the Accident Compensation Corporation (ACC) and the Earthquake Commission (EQC).

EQC recognises a liability in respect of outstanding claims and assesses the adequacy of its unearned premium liability. As required by financial reporting standards, a risk premium is applied to a central estimate to increase to 75% the likelihood that claims will be settled within this amount. No discount factor or inflation factor is applied to the EQC claims liability as claims are generally settled within one year.

All assets held by ACC and EQC are considered available to back present and future claims obligations. ACC and EQC have not deferred any acquisition costs in respect of insurance obligations at the reporting date.

Analysis of ACC insurance liability

The material insurance obligations of the Crown at balance date are managed by ACC. The accounting for these claims is made complex by the existence of a long "tail" to these claims. The rest of this note therefore focuses on these claims.

Future expenditure commitments exist in respect of claims notified and accepted in the current and previous years (but which will not be fully met until future years), and claims incurred but not notified, or accepted by, ACC at balance date.

PricewaterhouseCoopers Actuarial Pty Limited have prepared the independent actuarial estimate of the ACC outstanding claims liability as at 30 June 2009. The actuary is satisfied with the nature, sufficiency and accuracy of the data used to determine the outstanding claims liability.

Note 25: Insurance Liabilities (continued)
Actual
30 June 2009
$m 		30 June 2008
$m

Analysis of Outstanding ACC Claims Liability

 
Undiscounted outstanding claims liability 64,592 47,461
Discounted adjustment (43,469) (31,463)
Risk margin 2,663 2,008
Total outstanding ACC claims liability 23,786 18,006
Expected future claims payments - central estimate 19,862 15,059
Claims handling expenses 1,261 939
Risk margin 2,663 2,008
Total outstanding ACC claims liability 23,786 18,006

Movement in Outstanding ACC Claims Liability

 
Opening balance 18,006 15,392
Claims incurred for the year 3,515 2,881
Claims paid out in the year (3,395) (3,023)
Discount rate unwind 1,170 953
Experience adjustments (actuarial gains and losses):  
- actual and assumed claim experience 3,084 1,021
- change in discount rate 1,752 126
- change in inflation rate (345) 492
- change in other economic assumptions -  70
Other movements (1) 94
Closing outstanding ACC claims liability 23,786 18,006

The outstanding claims liability is the present value of expected payments for claims incurred plus a risk margin.

Note 25: Insurance Liabilities (continued)
Actual
30 June 2009
$m 		30 June 2008
$m

Movement in ACC Unearned Premium Liability

 
Opening balance 1,783 1,617
Earning of premiums previously deferred (1,783) (1,617)
Deferral of premiums on current year contracts 2,095 1,783
Other -  - 
Closing ACC unearned premium liability 2,095 1,783

The unearned premium liability represents premiums received in advance of the insured period.

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