40. Assets and liabilities in respect of insurance activities

The Group presents its insurance activities under the following headings in the statement of financial position:

• Assets in  respect  of  insurance  activities  are receivables on account of reinsurance and share of reinsurers in technical reserves.

Reinsurance receivables include receivables from reinsurers and reinsurance brokers resulting from concluded outward reinsurance contracts. Reinsurance receivables are measured at the amounts due less impairment allowances.

The reinsurer’s share in the technical provisions is determined on the basis of the gross provisions and the conditions specified in the reinsurance contracts. Therefore, as in the case of technical provisions, the majority of the reinsurer’s share in the provisions is determined on the basis of individual methods. In the case of the reinsurer’s share appointed at the level of aggregated data, the granularity of calculations is applied, which enables proper consideration of the parameters of the reinsurance contract, e.g. defining the reinsurance contract at the level of the claim year or policy year. The reinsurer’s share in the technical provisions is determined adequately and carefully.

• Liabilities in  respect  of  insurance  activities  comprise insurance technical reserves to cover current and future claims and costs which may arise from the insurance contracts concluded, e. unearned premium and unexpired risk reserves, outstanding claims and benefits reserve, reserve for bonuses and discounts for the insured, life insurance reserve, and other, as well as deferred reinsurance commission and reinsurance related liabilities.

Technical provisions are created to cover current and future claims and costs that may result from concluded insurance contracts. Provisions include both events that have occurred in the past but have not yet been settled, as well as events that will occur in the future. In most cases, provisions are created on an individual basis at the level of individual policies or claims, with the exception of, inter alia, IBNR reserve, which is determined at the level of homogeneous risk groups. All provisions are calculated using classical actuarial methods. The provisions take into account not only the expected claims and benefits payments and costs, but also any other cash flows resulting from concluded insurance contracts, e.g. bonuses and rebates. Provisions are created adequately and prudently in such a way as to include a certain risk margin.

Reinsurance commissions in the part falling for future reporting periods are settled in time according to the rules governing the creation of the provision for premiums with the reinsurer’s share.

Reinsurance liabilities include current liabilities towards reinsurers resulting from settlements made on the basis of outward reinsurance contracts. Reinsurance liabilities are recognized at their nominal value and measured at the amount required as at the balance sheet date.

• Amounts due  to  customers  – “Liabilities  in  respect  of  insurance  products”: Liabilities in respect of insurance products include liabilities from unit-linked products, safe capital product, structured products and insurance deposits. Technical reserves for life insurance where the investment risk is borne by the insurer are presented as liabilities in respect of insurance products measured at fair value. The measurement of these provisions is based on the value of the corresponding assets measured at fair value. Provisions measure at amortized cost include other provisions in respect of investment products which are mainly calculated using actuarial methods (provisions for life insurance, provisions for claims, etc.).

The Group recognises net income on insurance activities under commission income – in the line “offering insurance products” which comprises premium income, costs of insurance activities, claims and change in technical reserves, and the impact of the reinsurer’s share in the aforementioned items. The accounting policies for recognizing commission income on sales of insurance products linked to loans and advances are described in note “Interest income and expenses”.

Other financial information, see: Liabilities in respect of insurance products and Net income from insurance business.