NOTES TO F I NANC I AL STATEMENTS and thus, the adoption of IFRS 9 has had no material impact on the financial statements. Under IFRS 9, investments are recorded at fair value through profit or loss, and therefore the new impairment credit model of IFRS 9 is not applicable. Furthermore, insurance and reinsurance debtors are classified as insurance assets under IFRS 4 and are also excluded from the IFRS 9 impairment model. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1. Insurance and reinsurance contracts classification The Company issues insurance contracts in the normal course of business, under which it accepts significant insurance risk from its policyholders. As a general guideline, the Company determines whether it has significant insurance risk, by comparing benefits payable after an insured event with benefits payable if the insured event did not occur. Insurance contracts can also transfer financial risk. The Company issues drought, flood and tropical cyclone insurance cover to participating African countries. The Company also issues policies under the non-sovereign business and the perils written are similar to those currently insured by the Company i.e. drought, flooding and tropical cyclone. The Company introduced the Outbreaks and Epidemics Insurance Program (O&E) on 18 November 2022, which was written through the Company’s Outbreaks and Epidemics Segregated Account. The Company does not issue any contracts with direct participating features or reinsurance. 4.2. Insurance and reinsurance contracts accounting treatment 4.2.1. Separating components from insurance and reinsurance contracts The Company assesses its insurance and reinsurance products to determine whether they contain distinct components which must be accounted for under another IFRS instead of under IFRS 17. After separating any distinct components, the Company applies IFRS 17 to all remaining components of the (host) insurance contract. Currently, the Company’s products do not include any distinct components that require separation. 4.2.2. Level of aggregation IFRS 17 requires a company to determine the level of aggregation for applying its requirements. The Company previously applied aggregation levels under IFRS 4, which were significantly higher than the level of aggregation required by IFRS 17. The level of aggregation for the Company is determined firstly by dividing the business written into portfolios. Portfolios comprise groups of contracts with similar risks which are managed together. Portfolios are further divided based on expected profitability at inception into three categories: onerous contracts, contracts with no significant risk of becoming onerous, and the remainder. This means that, for determining the level of aggregation, the Company identifies a contract as the smallest ‘unit’, i.e., the lowest common denominator. However, the Company makes an evaluation of whether a series of contracts need to be treated together as one unit based on reasonable and supportable information, or whether a single contract contains components that need to be separated and treated as if they were stand-alone contracts. As such, what is treated as a contract for accounting purposes may differ from what is considered as a contract for other purposes (i.e., legal or management). IFRS 17 also requires that no group for level of aggregation purposes may contain contracts issued more than one year apart. The Company applied a full retrospective approach for transition to IFRS 17. The portfolios are further divided by year of issue and profitability for recognition and measurement purposes. Hence, within each year of issue, portfolios of contracts are divided into three groups, as follows: • A group of contracts that are onerous at initial recognition (if any) • A group of contracts that, at initial recognition, have no significant possibility of becoming onerous subsequently (if any) • A group of the remaining contracts in the portfolio (if any). 97
RkJQdWJsaXNoZXIy MTM3NDM0