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1993 SNA Update Information - Country comments for issue:
Non-life insurance services

Issue description
Issue description in [English] | [French] | [Russian] | [Spanish]
Several instances of massive insurance claims, notably those from the 11 September terrorist attack, focused attention on the measurement of non-life insurance services when catastrophic losses occur. This necessarily involves considering the treatment of reinsurance also. The output of insurance services as calculated using the 1993 SNA algorithm depends on the balance of premiums and claims (on an accrual basis). Output can therefore be extremely volatile (even negative) following major catastrophes, and this volatility impacts on GDP and balance of payments (reinsurance). The objective of the review is to propose measures that would be more consistent with the perception of production in this activity. In particular, medium- to long-term aspects of non-life insurance are to be taken into consideration. The issue will also cover the measurement of production of non-life insurance services in volume terms.
Country comments
Number of country comments for selected issue:49
  Date postedSourceComment
 11/27/2006AustraliaWe agree with most of the recommendations made by AEG at its December 2004 meeting, although we believe that profit sharing and bonuses should be treated as adjustments to premiums, rather than as other income transfers.
 10/10/2006SwedenFurther clarification/analysis required
 9/15/2006United KingdomWe agree with all the recommendations made by the AEG.
 9/15/2006LatviaAfter deep discussions and expert consultations we basically support the 1993 SNA Update Issues.
 8/18/2006ItalyWe are in favour of the AEG recommendation.
 8/18/2006SingaporeWe agree with the basis for the AEG's recommendation, but consider it useful for more explicit guidance on the practical application of the different approaches.
 7/28/2006LithuaniaIn general we support the recommendations.
 7/27/2006EgyptWe agree with changes recommended for calculating the output of non-life insurance services. The three recommended approaches (expectation approach, accounting approach and cost plus normal profit approach) will face a lot of practical applications problems.
 7/25/2006Central Bank of Costa RicaWe agree with the proposal to measure production of non life insurance services using adjusted claims and premium supplements, and that the difference between adjusted and observed claims be treated as a current transfer, and as a capital transfer when there are large claims due to large catastrophic events. We also agree with the treatment proposed of reinsurance flows.
 1/6/2006State Bank of PakistanWe support the recommendation of AEG to measure the output of non life insurance services based on adjusted claims and (possibly) adjusted premium supplements. However for countries who are in the process of implementation of SNA 93, more detailed explanation along with examples is necessary on the methods (expectation approach, accounting approach and some of cost plus normal profit approach).
 11/30/2005State Bank of VietnamWe agree with the recommendation of the AEG on using the approach for measuring non life insurance services. However it is necessary to add clear guideline and more information for some measurements proposed.
 5/23/2005IsraelWe agree with the change in measurement of production. It is, however, important to add clear guidelines for some of the measurements proposed. The measurement of prices using the expectation approach should be further clarified. Prices are indeed set according to expectations, but the actual net prices obtained ex post may differ. As in the case with NPL’s we would prefer to take into account the data known ex post (on average one would expect no difference between ex ante and ex post) so that we would prefer the Australian approach to measurement.
 5/19/2005Bank of IndonesiaBI agrees with the principal concept, but the proposed formula seems not easy to be implemented.
 5/10/2005Bank of BotswanaThe decision to abandon the inclusion of income form own funds seems to have been taken on a rather crude basis and may have been done too hastily. In particular the reason that consistency should be applied across the SNA may be difficult to invoke when changes are being considered elsewhere. In particular, the discussion of Non-insurance financial corporations seems to favour the inclusion of own funds in the computation of FISIM. Such an apparent difference in approach needs to be explained.
 5/9/2005Central Bank of IranWe agree on the recommendation of the AEG on using new approach for measuring non life insurance services output. However we think more information about 3 proposed approaches is necessary to choose the best one.
 4/25/2005Central Bank of West African States cb_WesternAfricanStates5;
 11/16/2004Central Bank of ChileAnte todo, nuestro total acuerdo con separar la producción de servicios de seguro del riesgo de occurencia de siniestros. Esta medida "estructural" de seguros va en la linea de disponer de una medición del seguro "subyacente", análoga a la de producto potencial. Por analogia igual razonamiento cabria en el caso del SIFMI separando la producción de servicios bancarios del cornportamiento de las tasas de interes. En este ultimo caso no se dispone de series del tipo primas e indemnizaciones, que pueden dar una buena medida de los servicios de seguro "subyacentes".
En la experiencia chilena, ante situaciones como el terremoto del ano 1985 y otros periodos de alta siniestralidad, se ha optado por medir el costo del servicios de seguros no de vida, incorporando siniestros promedios de 10 afios con el fin de obtener una producción mas representativa y estable de servicios de seguro. La diferencia entre la indemnización estimada y la efectiva se considera transferencia (D 75) y las primas netas e indemnizaciones se registran por sus montos efectivos, este tratamiento tambien se ha utilizado para la medición de los reaseguros con el exterior.
Finalmente, respecto a la inclusión de rentas de fondos propios en la medición de la producción y el tratamiento de participación en acciones y utilidades, estamos de acuerdo con la posicion mayoritaria de la encuesta al grupo AEG en junio pasada. Esto es no a la inclusión de dichas rentas, si a la inclusión de participaciones coma transferencias corrientes. En cuanto al tratamiento de camisianes y descuentos cama primas negativas, no se dispone de tados los antecedentes metodológicos que permitan una opinion fundada.
 11/3/2004Bank of Tanzania/National Bureau of StatisticsWe agree on the recommendation of the AEG on excluding income from own funds in the calculation of the output of non-life insurance as well as recommendations on issues related to commissions and rebates, profit sharing and bonuses, and exceptional claims.
 10/19/2004Central Bank of RussiaWe agree that the production of insurance services does not occur when the risk occurs. So we agree that the terminology should be changed and using the term “technical provision” instead of “technical reserves” is more consistent in this case. As for other changes in treatment of insurance services they are under discussion now. We have to postpone expressing our opinion about them.
 10/18/2004National Bank of Tajikistan The National Bank of Tajikistan agrees with the recommendations of the AEG.
 10/13/2004European Central BankThe AEG has approved the following recommendations: continue recording the production of (non-life) insurance services according to the difference between premiums (plus premium supplements) and claims, but on the basis of adjusted claims, and, optionally, adjusted premiums. Adjustments should be recorded according to one of three methods, i.e. the "expectation approach", the "accounting approach" or the sum of costs plus "normal" profits approach. Furthermore, the difference between net insurance premiums (D7l) and non life insurance claims incurred (D72) would be recorded as a transfer from insurance corporations to policy holders. In exceptional cases, such as catastrophes, part of this transfer should be classified as a capital transfer (D99).
Although the ECB would tend to agree in principle with these proposals, a final decision can be reached only when a consistent solution can be proposed for all sub-items under discussion, and implications for related statistics have been assessed.
 10/12/2004NicaraguaNicaragua has estimated the production of non-life insurance following the SNA 93. Nonetheless, the increase in insurance claims during 1998-1999 as result of hurricane Mitch, implied negative or low production values, affecting the consistency of the output series. In order to maintain consistent time series, Nicaragua adjusted the output using a two-year average coefficient of services insurance cost divided by premiums receivables and correcting the premiums receivables during 1998-1999. The traditional method was used for following the years. We are completely satisfied with the inclusion of this point in the agenda, because our own experience shows that making such adjustment helps to maintain consistent time series.
 10/12/2004Bank of ColombiaEstamos de acuerdo con las recomendaciones del grupo AEG, en mejorar las técnicas para la medición de la producción de las aseguradoras, con el fin de reducir la volatilidad generada por grandes catástrofes.
 10/12/2004Reserve Bank of AustraliaWe support most of the AEG recommendations, except on the treatment of bonuses and profit sharing arrangements. Similar to the Australian Bureau of Statistics, we feel that these items should be treated as adjustments to premiums (rather than as income transfers as is proposed by the AEG).
 10/6/2004National Bank of MoldovaWe agree that the production of insurance services should be estimated by using the following formula: Premium earned Plus adjusted premiums supplements Less adjusted claims. The difference between non-life insurance premiums and non-life insurance claims incurred should be treated as a current or capital transfer. We also agree that all reinsurance flows should be treated gross and use the same new formula as for direct insurance.
 10/5/2004Bank of KoreaWe accept the recommendation of the AEG in principle. Considering that it is not easy to estimate the adjusted claims and adjusted premium supplements in practice, however, an implementation manual or a specific example should be added to the SNA revision.
We are not convinced whether the income from own funds should be included or not and would like to have an additional examination.
 10/5/2004National Bank of BelgiumBelgium accepts the AEG recommendations and agrees with the formula for the measurement of the output of non life insurance but insists that the adjustment of premium supplements must stay optional. Indeed, we wonder if adjusted premium supplements using statistical smoothing of past data reflect correctly the expectation of the insurers. Moreover, introducing ex-ante concepts in the SNA may change the economic meaning of the National Accounts statistics and must be debated with economic analysts. That`s why we strongly support that the expectation approach, the accounting approach and the sum of costs plus "normal" profit approach remain all three listed in the revised SNA. Regarding the recommendation on reinsurance, countries with substantial imported reinsurance services might be faced with a problem. The lack of data will oblige them to make some assumptions based on their domestic market of reinsurance. On the treatment of profit sharing and bonuses, we would like to draw the attention to the fact that it`s not always possible to make the distinction between profit sharing and bonuses on the one hand and rebates on the other hand. So a practical application of this recommendation could be very difficult.
 10/4/2004South African Reserve BankWe accept the recommendation of the AEG on excluding income from own funds in the calculation of the output of non-life insurance.
We agree with the recommendations of the AEG on the issues of comissions and rebates, profit sharing and bonuses, and exceptional claims.
 9/30/2004Central Bank of MadagascarTous les ans, Madagascar connaît des catastrophes naturelles telles que des cyclones qui ravagent du jour au lendemain des propriétés d`une valeur plus ou moins importante affectant de manière brutale la croissance de la production. Cependant, ce genre de dommage n`est que très faiblement assuré à Madagascar, et n`a pas d`impact significatif sur la production des compagnies d`assurance qui y sont implantées. Néanmoins, Madagascar n`a pas d`objection sur les recommandations pour la mise à jour du SCN 1993, constatant qu`elles favoriseront une harmonisation de la méthodologie à l`échelle internationale.
 9/30/2004Bank of LatviaLatvia is in agreement with the recommendations of the AEG and we do not have any particular comment at this stage.
 9/30/2004National Bank of Switzerland m1(c)nb_sw5;
 9/30/2004National Bank of SwedenIn our competence as Balance of Payments compiler, we would like to make a comment on the issue on measurement of insurance and reinsurance: First of all we fully support changing the measurement of the service part of insurance transactions from the difference between premiums and claims to a treatment that mirrors the fact that the service part should cover the management of the risk and not the risk per se which is often hedged by funds, reinsurance, etc.
In this context three options are mentioned for the practical application of the general recommendation made by the AEG. We have, from our own experience, found that the third option, “The sum of costs plus `normal` profit approach”, is easy to apply and gives the effects sought by the recommendation. We therefore strongly support this option to be maintained in the final SNA update.
The SNA-update could also mention the practical implications of measuring crossborder insurance services. For the export of insurance transactions, the service charge would be easily calculated according to the options discussed above, but for imports one has to rely either on good mirror data, or to make certain assumptions. Since good mirror data are hard to achieve, a practical solution would be to base the calculation of the service charge for imports on data from domestic insurance companies.
 9/20/2004IndiaWe agree with the recommendation to measure the output of non-life insurance services by an approach that is more consistent with the general perception of production. This will more accurately reflect the output of these firms relating to the production of service of providing coverage of risk rather than the current approach, which depends on the occurrence of the risk. This will take care of the abnormal/abrupt movements in the production of these firms at current prices in the accounting period following catastrophes. Two basic approaches have been proposed namely the expectation approach and the accounting approach. Both the approaches appear to be appropriate and will reduce the volatility in the output measurement. However, estimates need to be made for few past years in respect of both the approaches before recommendations are firmed up. The third approach which uses sum of cost plus “normal profit” will completely eliminate “volatility” in the estimates and is the easiest to adopt.
 8/24/2004United KingdomWe are in a agreement with the AEG on the two recommendations on non-life insurance services.
 8/13/2004MalaysiaWe support the AEG recommendations for non-life insurance. However more information is necessary on the methods (expectation approach, accounting approach and the sum of cost plus normal profit approach) to estimate adjusted claims and adjusted premium supplements.
 8/12/2004AustraliaAustralia strongly supports most of the AEG recommendations. However, we do not agree that profit sharing and bonuses should be treated as income transfers. Our view is that these arrangements are adjustments to premiums.
 8/11/2004Germany m1(c)de5;
 8/11/2004CanadaCanada agrees with the AEG recommendations on insurance. The formula should be changed to reflect adjusted premiums and claims allowing both expectation and accounting approach as options. The technical reserves should also include equalisation and other provisions in the calculation. In large catastrophic events, the option of including large claims as capital transfers should be included.
 8/11/2004Slovak RepublicSlovakia fully supports all of the AEG decisions and recommendations to the measurement of non-life insurance services in the context of catastrophes, the extension and proposed changes in terminology for technical provisions. As far as the gross treatment of reinsurance and the exclusion of income from own funds in the output calculation is concerned, there is also fully agreement, because these issues are already implemented in the national accounts of the Slovak Republic.
 8/11/2004BotswanaThe AEG through consultation has agreed that own funds should not be included in the calculation of non life insurance output. We support this but it may be necessary if AEG also makes a follow-up on this issue further particularly were it is cited that some insurance companies in some countries include income from own funds in the picture when setting premium prices. This has impact amongst the beneficiaries of such insurance companies and it is something that has to be discussed. There must be strong reasons for this, but as long as this is done for some countries and not the other then this is a problem since the SNA is intended to be a consistent framework. Accordingly to some experts like Prinsloo have cited cases of this happening in certain part of the continent then it is also pertinent that the issue is also related and these be brought into the discussion.
 8/11/2004South AfricaWe accept the recommendation of the AEG on excluding income from own funds in the calculation of the output of non-life insurance. We agree with the recommendations of the AEG on the issues of commissions and rebates, profit sharing and bonuses, and exceptional claims.
 8/11/2004USAThe United States strongly supports the initiatives to improve the accounting for non-life insurance services. There have been important changes in the economic environment in this area, and improving the national accounting treatment is important to the national accounts and its users.
 8/11/2004NorwayWe agree that the production of insurance services should be estimated by a formula using adjusted claims and adjusted premium supplements, and that the difference between adjusted and non-adjusted claims can be treated as a capital transfer. We also agree that all reinsurance flows should be treated gross and use the same formula as direct insurance.
 8/11/2004DenmarkStatistics Denmark supports the proposals for non-life insurance services and the related transfers (the AEG majority view)
 8/11/2004Jordana. Accept the EAG recommendation on to continue using of the formula to calculate output based on the difference between premium and claims but to use adjusted claims and adjusted premium supplements. b. Accept the EAG recommendation to include in the SNA of three solutions to estimate adjusted claims: the expectation approach, the accounting approach, and sum of costs plus “normal profits”. c. Accept the AEG recommendation regarding the extension of technical provisions to equalization provisions and other special provisions. d. It is not recommended to include income from own funds as an additional item to premium supplements in the formula used to estimate the production of non life insurance, because the treatment of own fund should be the same in all activities. Thus, there is so no need to have an exception in this case. e. When accepting the introduction of adjusted claims and accepting to use expectation approach, then it is recommended to use expected premium supplements rather than observed premium supplements but the SNA should designate special annexes that explain the estimation methods. f. Agree with the new treatment of reinsurance, where all reinsurance flows are treated gross, and using the same formulae that direct insurance. g. Agree with the recommendation that decouple of net insurance premiums (D71) and actual non life insurance claims incurred (D72) in the distribution accounts. h. Agree to treat (optionally) the difference between expected and unexpected claims as capital transfer in case of major catastrophe. i. Agree with the AEG recommendation to change the terminology for technical reserves, which will be called technical provisions, and for “claims due” which will be called “claims incurred”.
 8/11/2004The NetherlandsLeaving apart the items that were part of the recent AEG`s written consultation and that will be finalised during the next meeting of the AEG (inclusion of own funds, commissions and rebates, profit sharing and bonuses, capital transfers), we agree with the recommendations of the AEG. In relation to the items still under discussion, I refer, for the time being, to our response to Francois Lequiller.
 8/11/2004New Zealand• Measure the output of insurance services using a formula based on adjusted claims and (possibly) adjusted premium supplements. Agreed. This is consistent with existing NZ practice which is based on using a smoothed (moving average) loss ratio. We agree with the AEG recommendation that adoption of adjusted premium supplements is optional. • Extension of coverage of technical provisions. Agreed. • Decoupling net insurance premiums and claims. Agreed. As noted above, this is consistent with current NZ practice. • Reinsurance. Adopt a gross treatment and the same formula for direct insurance. Agreed. In New Zealand, most reinsurance is imported and the gross treatment for reinsurance imports / exports is current practice. • Classify commissions and rebates as negative premiums, and profit sharing and bonuses as other income transfers. Agreed. • Classify exceptional claims as capital transfers. Agreed.
 8/11/2004Macao, SAR ChinaWe are pleased to express our agreement with the proposal.
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