Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community

• 13.17. Whenever possible regional values which directly correspond in concept with the national values should be estimated directly by means of the bottom-up methods. The top-down procedures do not lead to a solid, reliable data basis for judging the accuracy of the estimated values, whereas in the bottom-up methods attention is drawn to a possible divergence with the national totals.

AGGREGATES BY INDUSTRY

• 13.18. An industry for a region consists of a group of local KAUs engaged in the same, or similar, kind of activity (see paragraph 2.108). The local KAU is the unit on which the data related to production activities (output, intermediate consumption, etc.) are based.

• 13.19. As a general principle, aggregates on production activities should be allocated to the region where the unit carrying out the relevant transactions is resident. The residence of the local KAU is an essential criterion for the allocation of these aggregates to a particular region.

• 13.20. The general principle of allocating gross fixed capital formation by region is ownership, just as in the accounts of the total economy (see paragraph 2.05, footnote (1)). Fixed assets owned by a multiregional unit are allocated to the local KAUs where they are used. As in national accounts fixed assets obtained through operational leasing are recorded in the region of the owner and those obtained through financial leasing in the region of the user.

• 13.21. In practice, it may be that information is only available at the level of units which contain several local KAUs engaged in different activities and/or regions. In this case, available indicators (e.g. compensation of employees or employment per region) have to be used to regionalize the figures by industry.

• 13.22. When defining a local KAU three situations can be distinguished:

• (a) a production activity with significant ([^E0116]) labour input at a fixed location raises no problems. However, in some cases further clarification is needed (see paragraphs 13.24 to 13.27);

• (b) a production activity without significant labour input at a fixed location is not considered as a separate local KAU and the production should be attributed to the local unit that is responsible for managing this production;

• (c) for a production activity without a fixed location the concept of residence at the national level should be applied.

• 13.23. Ancillary activities are not isolated to form distinct entities or separated from the principal or secondary activities or entities they serve (see paragraph 2.104). Accordingly, ancillary activities should be integrated with the local KAUs they serve.

Ancillary activities may be carried out in separate locations, located in another region than the local KAUs they serve. The strict application of the abovementioned rule for the geographical allocation of the ancillary activities would result in the underestimation of the aggregates in the regions where ancillary activities are concentrated. Therefore according to the principle of residence, they have to be allocated to the region where the ancillary activities are situated; they remain in the same industry as the local KAUs they serve.

• 13.24. For some industries, the methods for regionalization need some further clarification. The industries are:

• (a) construction;

• (b) transport storage and communication;

• (c) financial intermediation.

• 13.25. For the construction industry, building sites should be treated as independent local KAUs when the activity is significant (see paragraph 2.09, footnote (4)). Given the mobility of some equipment, for example pile-drivers and cranes, between local units of the same KAU and the absence of information at site level, it is recommended that gross fixed capital formation of such equipment be allocated to the headquarters of the KAU.

• 13.26. For transport industries including pipeline transport it is essential to define the local KAUs to which the production and capital formation should be attached. For land transport industries (excluding railways) the production and capital formation should be attached to depots or similar local KAUs where the equipment is based. For water transport industries the production and mobile equipment should be allocated to the home base of the unit. Pipeline networks should be attached to the local KAU that exploits it.

For rail and air transport industries top-down methods, breaking down the national aggregates into regions according to suitable indicators, should be used. Compensation of employees should be allocated to the region where the people are employed. The gross operating surplus should be allocated to the regions according to indicators relating to the activity of the train or air routes.

Regarding communication industries, telephone boxes, telephone sets, telecommunication lines, etc. perform only a supporting role. Therefore, they do not form distinct entities and should be attributed to the local KAU responsible for managing them. The investment in infrastructure should also be allocated to these local units.

• 13.27. For financial intermediation industries, value-added should be allocated according to the income approach. Compensation of employees should be allocated to the local KAUs where the people are employed. Gross operating surplus of credit institutions should be distributed between local KAUs in proportion to the sum of loans and deposits, and gross operating surplus of insurance institutions in proportion to the premiums received. Gross fixed capital formation mainly consists of buildings; therefore, it should be allocated to the region where they are situated.

• 13.28. Output is to be valued at basic prices (see paragraph 3.47). Products used for intermediate consumption are to be valued at purchasers' prices at the time they enter the process of production (see paragraph 3.72). As a consequence gross value-added per industry is valued at basic prices.

Gross fixed capital formation is valued at purchasers' prices including installation charges and other costs of ownership transfer. When produced on own-account it is valued at basic prices of similar fixed assets or at costs of production if such prices are not available (see paragraph 3.113).

• 13.29. The regional equivalent of GDP is GDPR (gross domestic product per region). GDPR is valued at market prices by adding the regionalized taxes less subsidies on products and imports to values added per region at basic prices. The sum of GDPR at market prices per region, including GDPR of the extraregio territory, equals GDP at market prices.

HOUSEHOLD ACCOUNTS

• 13.30. Gross domestic product per region is the result of the productive activities of the local KAUs resident in a region. The processes of distribution and redistribution of income result in other meaningful balancing items, namely primary income and disposable income. Due to the considerations mentioned in paragraphs 13.10 to 13.14, in regional accounts these income concepts are limited to households.

• 13.31. Regional accounts of households are a regional specification of the corresponding accounts at the national level. For practical reasons the accounts are limited to:

• (a) allocation of primary income account;

• (b) secondary distribution of income account.

In general terms, they aim at measuring primary income and disposable income of households which are resident in a region.

• 13.32. The regional household accounts are based on the households that are resident in a regional territory. For the definition of households as institutional units and for the definition of the institutional sector households, see paragraphs 2.13, 2.16, 2.75 and 2.76. The number of persons that are members of the resident households add up to the total resident population of the region.

• 13.33. In general the rules for determining the residence of households at national level also apply to the regional accounts of households. However, concerning the residence of students and long-term patients an exception is made when the host region is in the same country. In regional accounts, they are treated as resident of the host region if they stay there more than one year.

• 13.34. In the regional accounts of households, two considerations have to be made regarding households owning an unincorporated enterprise, land and/or a second dwelling in another region:

• (a) a household owning an unincorporated enterprise (not viewed as a quasi-corporation at the national level) in another region the unincorporated enterprise is considered to be a resident (notional unit) in the host region. As a consequence, mixed income resulting from the compilation of aggregates by industry is part of the mixed income of the host region. However mixed income as registered in the allocation of primary income account of households per region is to be equal to total mixed income received by households resident in a region, irrespective of the region in which this income is generated;

• (b) a household owning land and/or a second dwelling in another region here, the land and/or the second dwelling are also considered to be notional units resident in the host region. Consequently, the rents payable by the tenants of the land and/or the dwelling are paid to the notional unit. If the second dwelling is used by the owner for own final consumption, the rental value should be registered as an interregional export from the region where the dwelling is located to the region where the owner resides. The latter region thus imports this service and uses it for final consumption expenditure of households. As in the case of mixed income, the operating surplus resulting from this production process will differ from the operating surplus in the allocation of primary income accounts of households; for the total economy, both are equal.

ANNEX I

FINANCIAL INTERMEDIATION SERVICES INDIRECTLY MEASURED

CHANGES TO BE MADE IN THE ESA CHAPTERS IF FISIM IS TO BE ALLOCATED

Chapter 1

1.13, fifth paragraph, (d)	Delete after‘The ESA also contains many specific conventions, e.g.:’:‘recording the use of financial services indirectly measured as the intermediate consumption of a nominal sector or a nominal industry.’	Replace by:‘allocating the use of financial intermediation services indirectly measured (FISIM) to user sectors/industries.’
1.25, second paragraph		Add after the list of points introduced by‘Some of the major differences in concepts are:’the following point: ‘(i)  the use of financial intermediation services indirectly measured (FISIM) is now allocated to user sectors/industries instead of to a nominal sector (industry). As a consequence, the use of FISIM is not anymore by convention recorded entirely as intermediate consumption, but can also be final consumption and exports. This implies then that imports of FISIM can also occur.’

Chapter 3

3.63	Delete all the text from the beginning until‘… is valued on the basis of the fees of commissions charged’ included, at the end of the fourth paragraph.	Replace by: ‘J.  Financial intermediation services (this includes insurance services and pension funds services) Financial intermediation services (excluded insurance services and pension funding services) consist in: (a)  financial intermediation services directly charged by financial intermediaries to their clients and measured as the sum of fees and commission charged. Financial intermediaries can charge explicitly for the intermediation services which they provide. The output of such services is valued on the basis of fees and commissions charged; (b)  financial intermediation services indirectly charged and indirectly measured (FISIM). Financial intermediaries provide services for which they do not charge explicitly fees and commissions. They pay lower rates of interest than would otherwise be the case to those who lend them money and charge higher rates of interest to those who borrow from them. Consequently, FISIM output is generated by the management by financial intermediaries of loans and deposits whose rates they control; in contrast, there is no intermediation service for securities other than shares. The output of the subsectors S122 (other financial institutions) and S123 (other financial intermediaries excluding insurance corporations and pension funds), except investment funds is valued on the basis of the difference between the actual rates of interest payable and receivable and a ‘reference’ rate of interest. For those to whom the intermediaries lend funds, both resident and non-resident, it is measured by the difference between the effective interest charged on loans and the amount that would be paid if a reference rate were used. For those from whom the intermediaries borrow funds, both resident and non-resident, it is measured by the difference between the interest they would receive if a reference rate were used and the effective interest they actually receive; (c)  financial intermediation services provided by the central bank. The central bank must not be included in the calculation of FISIM: its output is measured as the sum of costs.’
3.70(j)	Delete:‘only for the total economy: all financial intermediation services indirectly measured (FISIM) provided by resident producers.’	Replace by:‘the use of financial intermediation services indirectly measured by resident producers.’
3.70.		Add: ‘(k)  By convention, the central bank output should be entirely allocated to the intermediate consumption of other financial intermediaries (subsectors S122 — S123).’
3.76(e)		Add to‘financial services directly charged;’:‘and the part of financial intermediation services indirectly measured used for final consumption purposes by households;’
3.142(h)		Add immediately after‘financial services by the amount of the explicit commissions and fees;’ the phrase:‘and the part of financial intermediation services indirectly measured used by non-residents;’

Chapter 4

4.51, second paragraph	Delete:‘The value of the services provided by financial intermediaries not being allocated among different customers, the actual payments or receipts of interest to or from financial intermediaries are not adjusted to eliminate the margins that represent the implicit charges made by financial intermediaries. An adjustment item is needed in the allocation of primary income account of financial intermediaries and of a nominal industry to which, by convention, the whole output of financial intermediaries is allocated as intermediate consumption.’	Replace by:‘The value of the services provided by financial intermediaries being allocated among different customers, the actual payments or receipts of interest to or from financial intermediaries need to be adjusted to eliminate the margins that represent the implicit charges made by financial intermediaries. The amounts of interest paid by borrowers to financial intermediaries must be reduced by the estimated values of the charges payable, while the amounts of interest receivable by depositors must be similarly increased. The values of the charges are treated as payments for services rendered by financial intermediaries to their customers and not as payments of interest.’

Chapter 8

8.09.		EXPLANATORY NOTE Add to figures presented: Tables A.I.1 and A.I.2, to show the consequences of allocation of FISIM on figures presented in the chapter 8, ‘Sequence of accounts and balancing items’ (numerical example).
8.14.	Delete:‘As financial intermediation services indirectly measured (FISIM) are not allocated to user sectors, the whole of the value of the output of FISIM is treated as the intermediate consumption of a nominal sector with zero output and negative value added equal in size but opposite in sign to intermediate consumption. In this way, the value added of all sectors and industries together is reduced in total by this amount. To lighten the presentation of accounts, it is possible not to insert a supplementary column for the nominal sector, but instead to take into account the corresponding figure in the column total economy.’	Replace by:‘As financial intermediation services indirectly measured (FISIM) are allocated to user sectors, certain parts of interest payments are reclassified as payments of services. This reclassification has consequences for the values of output and intermediate consumption (as well as for the values of imports, exports and final consumption).’
8.24.	Delete:‘As financial intermediation services indirectly measured (FISIM) are not allocated to user sectors, the entries shown for interest are those for actual interest payable and receivable. An adjustment is made to resources in the column financial corporations (with a negative sign) and in the column nominal sector (with a positive sign). To lighten the presentation of accounts, it is possible not to insert a supplementary column for the nominal sector, but instead to present the corresponding figure in the column total economy.’	Replace by:‘As financial intermediation services (FISIM) are alloced to user sectors, the item ‘interest’ in the allocation of primary income account corresponds to interest payable and receivable after FISIM has been deducted from actual payables by borrowers and added to actual receivables by lenders.’

Chapter 9

9.25(a)	Delete:‘the intermediate consumption by industry includes the use of financial intermediation services indirectly measures that are recorded in a nominal industry (see paragraph 9.33);’
9.25(b)	Delete:‘minus the use of financial intermediation services indirectly measured (recorded in a nominal industry, see paragraph 9.33.)’
9.33.	Delete:‘Throughout the supply and use tables, the  NACE Rev. 2 industry classification is extended with a nominal industry for the use of financial intermediation services indirectly measured. In the supply table, no transactions are recorded at all for this industry. In the use table, that total use of financial intermediation services indirectly measured is recorded as the intermediate consumption of this nominal industry. As this nominal industry does not have any other transactions, its net operating surplus is negative by the amount of its intermediate consumption; all other components of its value added are zero. As a consequence, its total gross value added is equal to its (negative) net operating surplus.’

Table A.I.1 — Effect of allocating FISIM to institutional sectors, including changes for non-market producers

Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources
Accounts	Total	Goods and services (res.)	S.2	S.1	S.15	S.14	S.13	S.12	S.11	Transactions and balancing items	Transactions and balancing items	S.11	S.12	S.13	S.14	S.15	S.1	S.2	Goods and services (uses)	Total	Accounts
Accounts	Total	Goods and services (res.)	Rest of the world	Total economy	NPISHs	Households	General government	Financial corporations	Non-financial corporations	Transactions and balancing items	Transactions and balancing items	Non-financial corporations	Financial corporations	General government	Households	NPISHs	Total economy	Rest of the world	Goods and services (uses)	Total	Accounts
I.Production account/external account	2	2								P.72	Imports of services							2		2	I.Production account/external account
I.Production account/external account	4		4							P.62	Exports of services								4	4	I.Production account/external account
I.Production account/external account										P.1	Output		48	6		3	57			57	I.Production account/external account
I.Production account/external account	27			27	3	0	6	0	18	P.2	Intermediate consumption										I.Production account/external account
I.Production account/external account	30		- 2	30				48	- 18	B.1	Value added/external balance	- 18	48				30			30	I.Production account/external account
II.1.1.Generation of income account	30			30				48	- 18	B.2	Operating surplus	- 18	48				30			30	II.1.1.Generation of income account
II.1.2.Allocation of primary income account	230		13	217	6	14	35	106	56	D.41	Interest	33	106	14	49	7	209	21		230	II.1.2.Allocation of primary income account
II.1.2.Allocation of primary income account	22			22	1	35	- 21	48	- 41	B.5	Balance of primary incomes	- 41	48	- 21	35	1	22			22	II.1.2.Allocation of primary income account
II.2.Secondary distribution of income account	22			22	1	35	- 21	48	- 41	B.6	Disposable income	- 41	48	- 21	35	1	22			22	II.2.Secondary distribution of income account
II.4.Use of income account	28			28	3	19	6			P.3	Final consumption expenditure										II.4.Use of income account
II.4.Use of income account			6	- 6	- 2	16	- 27	48	- 41	B.8n	Saving, net/external balance										II.4.Use of income account

Table A.I.2 — Effect to allocating FISIM to nominal sector only

Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources
Accounts	Total	Goods and services (res.)	S.2	S.1	S.15	S.14	S.13	S.12	S.11	Nominal	Transactions and balancing items	Transactions and balancing items	Nominal	S.11	S.12	S.13	S.14	S.15	S.1	S.2	Goods and services (uses)	Total	Accounts
Accounts	Total	Goods and services (res.)	Rest of the world	Total economy	PISHs	Households	General government	Financial corporations	Non-financial corporations	Nominal	Transactions and balancing items	Transactions and balancing items	Nominal	Non-financial corporations	Financial corporations	General government	Households	PISHs	Total economy	Rest of the world	Goods and services (uses)	Total	Accounts
I.Production account											P.1	Output			48				48			48	I.Production account
I.Production account	48			48						48	P.2	Intermediate consumption									48	48	I.Production account
I.Production account								48		- 48	B.1	Value added/external balance	- 48		48								I.Production account
II.1.1.Generation of income account								48		- 48	B.2	Operating surplus	- 48		48								II.1.1.Generation of income account
II.1.2.Allocation of primary income account	222		16	206	7	17	39	77	66		D.41	Interest		25	125	12	33	5	200	22		222	II.1.2.Allocation of primary income account
II.1.2.Allocation of primary income account											P.119	Adjustment for FISIM	48		- 48								II.1.2.Allocation of primary income account
II.1.2.Allocation of primary income account				- 6	- 2	16	- 27	48	- 41		B.5	Balance of primary incomes		- 41	48	- 27	16	- 2	- 6				II.1.2.Allocation of primary income account
II.2.Secondary distribution of income account				- 6	- 2	16	- 27	48	- 41		B.6	Disposable income		- 41	48	- 27	16	- 2	- 6				II.2.Secondary distribution of income account
II.4.Use of income account			6	- 6	- 2	16	- 27	48	- 41		B.8n	Saving, net/external balance											II.4.Use of income account

ANNEX II

LEASING AND HIRE PURCHASE OF DURABLE GOODS

DEFINITIONS

• 1. In addition to purchasing durable goods outright, institutional units can obtain the use of them in the following ways: operating leasing, financial leasing and hire purchase. In all three cases the institutional unit in question acquires the right to use a durable good, although the good legally remains the property of another unit.

Leasing

• 1. When one institutional unit A owns a durable good and transfers the right to use this good to another unit B, A is said to be the ‘lessor’ and B the ‘lessee’. Payments from B to A in exchange for the transfer of user rights are called ‘rental payments’. The lessor may be identical with, or a subsidiary of, the producer or seller of the durable good, but the lessor may also be a completely independent unit with no ties to the producer or seller. All sorts of produced durable goods, from buildings and structures to consumer durables, may be the subject of leasing, and any kind of institutional unit may use leasing to obtain user rights over durable goods. The two types of leasing, operating and financial leasing, are treated quite differently in the system.

Operating leasing

• 1. The lessee acquires the right to use a durable good for a certain period of time, which may be long or short and not necessarily settled in advance. When the leasing period expires, the lessor expects to receive his good back in more or less the same condition as when he hired it, apart from normal wear and tear. The lessor is then likely to hire the good to another lessee or to use it otherwise. Thus, the leasing period does not cover all, or a predominant part of, the good's economic lifetime.

Units engaged in operating leasing possess expert knowledge about the kinds of durable goods they hire. They keep stocks of these goods to be able to hire them on demand or at short notice. Usually they offer a variety of models to choose from. In order to keep their durable goods in good working order, lessors must carry out maintenance and repair services on goods awaiting hire. Lessors also normally assume responsibility for repair and maintenance of a good, as well as replacement in case of a breakdown, while the good is hired to a lessee.

Operating leasing does not cover situations where the owner of equipment also provides staff to operate the equipment, or the hiring of non-produced assets, as these activities are classified elsewhere (see paragraph 7).

Financial leasing

• 1. The lessee acquires the right to use a durable good in exchange for rental payments over a predetermined and protracted term. If all risks and rewards of ownership are, de facto though not de jure, transferred from lessor to lessee, the lease is a financial one. In financial leasing, the leasing period covers all, or most of, the economic lifetime of the durable good. At the end of the leasing period the lessee often has the option to buy the good at a nominal price. The lessor does not need to possess any expertise about the good in question. He offers no repair, maintenance or replacement services to the lessee. Normally, the good is chosen by the lessee and delivered directly to him by the producer or seller. The lessor's role is thus purely financial.

The ESA recognizes the economic reality behind financial leasing by recording it as follows: the lessor provides the lessee with a loan enabling the lessee to purchase a durable good, of which the lessee becomes the de facto owner. Thus, the system treats the durable good as if owned by the lessee from the beginning of the leasing period. Rentals actually paid by the lessee to the lessor have to be subdivided into repayments of principal and interest payments related to the imputed loan.

Hire purchase

• 1. A durable good is sold to a purchaser in return for agreed future payments. The buyer takes possession of the good immediately, though in law it remains the property of the seller or financier as collateral/guarantee until all agreed payments have been made. Hire purchase is usually restricted to consumer durables, and most purchasers are households. Financiers of hire purchase contracts are typically separate institutional units operating in close cooperation with sellers of durable goods.

TREATMENT IN THE ACCOUNTS

Operating leasing

• 1. A durable good purchased by a lessor for the purpose of leasing is part of the lessor's gross fixed capital formation (P.51) and is shown as a tangible fixed asset (AN.III) in the lessor's balance sheet during its entire economic life. Subsequent capital consumption (K.1) in respect of the durable good is recorded in the lessor's accounts.

Rental payments received by a lessor are shown in his production account as output (P.1) of leasing services. If the lessee is a producer, rental payments are part of his intermediate consumption (P.2). When the lessee is a household acting as a final consumer, rental payments are part of his final consumption expenditure (P.3).

• 1. In  NACE Rev. 2, operating leasing of real estate is classified in  class 68.20 ‘Renting and operating of own or leased real estate’. Operating leasing of other durable goods is classified in  division 77 ‘Rental and leasing activities’ . Operating leasing does not comprise the renting of machinery or equipment with operating staff, which is classified according to the services provided by the equipment and staff. For example, the hiring of a lorry with driver is classified in  class 49.41 ‘Freight transport by road’. Institutionally, operating leasing corporations are classified in sector S.11 ‘Non-financial corporations’, but operating lessors may also be found in sector S.14 ‘Households’.

If the lessor is resident while the lessee is non-resident, rental payments are shown as exports of services (P.62). As the leased good remains on the balance sheet of a resident unit (the lessor), the good does not appear in any of the rest of the world accounts. If the lessor is non-resident while the lessee is resident, rental payments are recorded as imports of services (P.72). In this case the good itself is not considered to enter the economic territory (only its services are). Thus the leased good appears neither in the rest of the world accounts nor in any other account.

Financial leasing

• 1. If the lessee is a producer, the durable good is shown as gross fixed capital formation (P.51) for the lessee at the beginning of the leasing period. Throughout the leasing period (unless the lessee defaults on the rental payments) the good is shown as a tangible fixed asset (AN.III) in the balance sheet of the lessee. Subsequent capital consumption (K.1) is shown in the accounts of the lessee. At the end of the leasing period, either (i) the lessee buys the good at its residual value when it remains on his balance sheet, or (ii) the good reverts to the lessor, when it is shown as negative gross fixed capital formation for the lessee and thus leaves the lessee's balance sheet, and may enter the balance sheet of the lessor or that of a third party, to whom the lessor has sold on.

• 1. If the lessee is a household acting as a final consumer, the durable good is treated as if bought by the lessee for the purpose of final consumption at the beginning of the leasing period. This means that the purchaser's price of the leased good is part of the lessee's final consumption expenditure (P.3) at the beginning of the leasing period and that the good appears only as a consumer durable in the memorandum item to his balance sheet.

A loan (F.4) is imputed from lessor to lessee. The principal of this loan is the purchaser's price of the leased good plus transfer costs (if any). The outstanding imputed loan (AF.4) is shown in the lessor's and lessee's balance sheets as a financial asset and liability, respectively. Payments of rental are considered to comprise two elements, repayment of principal (F.4) and interest (D.41), with the final repayment coinciding with the termination of the financial lease.

• 1. The interest rate on the imputed loan is implicitly determined so that accumulated repayments over the leasing period exactly equal the principal. When rental remains constant from period to period, the interest part of rental will decline over time, while the repayment part will increase correspondingly, as for a loan payable in equal instalments. When principal, rental and length of the leasing period are known for each contract, the interest rate, the interest payments and the repayments can easily be calculated using standard formulae. When detailed data on each leasing contract are not available, which is often the case in practice, reasonable assumptions must be made in order to carry out these calculations. In many countries business accounting treats financial leasing in a similar way as described here, which facilitates the data situation.

• 1. Financial lessors' productive activity is financial intermediation. Usually lessors do not charge explicitly for their intermediation services. Their output is therefore mainly or exclusively financial intermediation services indirectly measured (Fisim), calculated similarly to other financial intermediaries:  property income receivable less interest payable, excluding any property income receivable from the investment of their own funds ([^E0117]). Some financial lessors incur liabilities to other independent units when interest payable is observable and the calculation of Fisim is straightforward. Other financial lessors incur liabilities only to their parent companies when interest payable may be difficult to observe. In the latter case it may be necessary to estimate the amount of interest payable by using an appropriate interest rate.

Financial leasing corporations are classified in the institutional subsector S.123 ‘Other financial intermediaries except insurance corporations and pension funds’. The activity classification is  NACE Rev. 2 class 64.91 ‘Financial leasing’.

• 1. The ESA's treatment of financial leasing implies that the leased good does not appear in any of the lessor's accounts. Whether or not the lessor is resident or non-resident is thus of no consequence to the treatment of the good itself. If the producer or seller of the good is resident while the lessee is non-resident, the leased good is treated as exported (P.61) when the lessee takes possession of it, i.e. at the beginning of the leasing period. If the producer/seller is non-resident while the lessee is resident, the good is considered to be imported (P.71) when the leasing period begins.

If the lessor is resident while the lessee is not, a loan (F.4/AF.4) is imputed from a resident unit (the lessor) to a non-resident unit (the lessee). If the lessor is non-resident and the lessee is resident, a loan is imputed from a non-resident unit (the lessor) to a resident unit (the lessee). As in the case of leasing transactions between residents, rental payments are broken down into interest (D.41) and repayments of principal (F.4).

Hire purchase

• 1. The durable good is recorded as if bought by the purchaser the day he takes possession of it at the price the purchaser would have paid in a cash transaction. The purchaser receives an imputed loan (F.4/AF.4) of equivalent value. The ESA splits the payments from purchaser to financier into repayments of principal (F.4) and interest payments (D.41), using the same method as the one applied for financial leasing.

The productive activity carried out by financiers of hire purchase contracts is financial intermediation. As they do not usually charge explicitly for their services, their entire output is financial intermediation services indirectly measured (Fisim), calculated as property income receivable less interest payable, excluding any property income receivable from own funds. As in the case of financial leasing, the amount of interest payable may be difficult to observe and must therefore be estimated.

• 1. In  NACE Rev. 2, financiers of hire purchase contracts are classified in  class 64.92 ‘Other credit granting’. Hire purchase corporations are classified in institutional subsector S.123 ‘Other financial intermediaries except insurance corporations and pension funds’, but financiers of hire purchase contracts may also be encountered in sector S.14 ‘Households’.

If the purchaser is non-resident while the financier is resident, the good is treated as exported (P.61) when the purchaser takes possession of it. In this case, the financier provides a non-resident unit (the purchaser) with a loan (F.4/AF.4). If the purchaser is a resident unit while the financier is not, the good is recorded as imported (P.71) when delivered to the purchaser, who at the same time obtains a loan (F.4/AF.4) from the non-resident financier. Repayments of principal (F.4) and interest payments (D.41) are treated in the same way as for financial leasing involving non-resident units.

ANNEX III

INSURANCE

INTRODUCTION

• 1. There are two main types of insurance: social insurance and other insurance.

Social insurance may be subdivided into

• (a) social security schemes of government,

• (b) private funded social insurance schemes, and

• (c) unfunded social insurance schemes operated by employers.

Other insurance may be subdivided into

• (a) other life insurance, and

• (b) other non-life insurance.

Reinsurance and insurance auxiliaries are treated in separate sections of this Annex. These topics relate mainly to other insurance, but they may also relate to social insurance.

DEFINITIONS

Social insurance

• 1. Social insurance schemes are schemes in which social contributions are paid by employees or other individuals, or by employers on behalf of their employees, in order to secure entitlement to social insurance benefits for the employees or other contributors, their dependants or survivors. Social insurance schemes cover social risks or needs ([^E0118]). Unlike social assistance benefits, social insurance benefits are conditional on participation in a scheme.

• 1. Social insurance schemes are often organized collectively so that those participating do not have to take out individual insurance policies in their own names. However, some social insurance schemes may permit, or even require, participants to take out policies in their own names. Individual policies are treated as part of a social insurance scheme if they cover social risks or needs and if at least one of the following three conditions is satisfied:

• (a) participation in the scheme is compulsory either by law or by the conditions of employment,

• (b) the scheme is operated on behalf of a group and restricted to group members, or

• (c) an employer makes a contribution to the scheme on behalf of an employee.

Social security schemes of government

• 1. These schemes are imposed, controlled and financed by government units and cover the entire community, or large sections of the community. Social security schemes of government may be funded or unfunded. When separate funds can be identified, they remain the property of the government and not of the beneficiaries of the schemes. Social security schemes' receipts consist mainly of contributions paid by individuals and by employers on behalf of their employees, but they may also include transfers from other government units. Participation in social security schemes is usually, though not always, compulsory. The benefits paid to individuals are not necessarily determined by the amounts previously paid in contributions.

It should be noted that social insurance schemes organized by government units for their own employees are not classified as social security schemes, but as private funded or unfunded social insurance schemes.

Private funded social insurance schemes

• 1. There are two categories of such schemes. The first consists of schemes in which the social contributions are paid to insurance enterprises or autonomous pension funds that are separate institutional units from both the employers and the employees. The insurance enterprises or autonomous pension funds are responsible for managing the resulting funds and paying the social benefits. The second category consists of schemes in which employers maintain special reserves to defray social benefits. These reserves are segregated from their other reserves, but they do not constitute separate institutional units from the employers and are referred to as non-autonomous pension funds.

Unfunded social insurance schemes operated by employers

• 1. These are schemes in which employers pay social benefits to their employees, former employees or their dependants out of their own resources without creating special reserves for the purpose.

Other insurance

• 1. Other insurance provides individual institutional units exposed to certain risks with financial protection against the consequences of the occurrence of specified events. It is also a form of financial intermediation in which funds are collected from policy holders and invested in financial or other assets which are held as technical reserves to meet future claims arising from the occurrence of the events specified in the insurance policies.

Other insurance policies held by households may cover the same risks or needs as those covered by social insurance schemes. However, other insurance policies held by households are distinguished from social insurance policies by the fact that they are taken out on the individual household's own initiative and for their own benefit, independently of their employers or government.

Other life insurance

• 1. Holders of other life insurance policies are exclusively households, resident or non-resident. The policyholder makes regular payments to an insurer in return for which the insurer guarantees to provide a benefit at a given date or earlier if the policyholder dies before. If the policyholder cancels the policy before the agreed expiration date, the policyholder is entitled to a partial benefit from the insurer. A benefit is thus always paid to the policyholder or his survivors. Policies that provide a benefit in the case of death within a given period but in no other circumstances, usually called term insurance, are not regarded as other life insurance, but as other non-life insurance. In practice, because of the way in which insurance corporations keep their accounts, it may not always be possible to separate term insurance from other life insurance. In these circumstances, term insurance may have to be treated in the same way as life insurance for purely practical reasons.

A life insurance claim may be paid as a lump sum or as an annuity. The claim may be fixed or may vary to reflect the income earned from the investment of premiums during the period for which the policy operates (‘with-profit’ policies). A special kind of with-profit policy is a unit-linked policy, where the claim varies according to the value of a segregated fund.

Other non-life insurance

• 1. All kinds of institutional units may be holders of other non-life insurance policies. Other non-life insurance includes term insurance and insurance against every risk other than death, for example accidents, sickness or fire. Claims are usually paid as lump sums but may also be paid as annuities. A claim is not always paid in respect of an other non-life insurance policy. Typically the number of claimants is much smaller than the number of policyholders. For an individual policyholder there is no relationship between the premiums paid and the claims received, even in the long term.

Reinsurance

• 1. An insurance enterprise undertaking insurance with policyholders often transfers some of the risks incurred to other insurance enterprises. These transactions between insurance enterprises are called reinsurance.

Both life and non-life insurers are involved in reinsurance transactions. Insurance enterprises that accept reinsurance may engage in both reinsurance and insurance with policyholders, or they may be specialist reinsurers.

Insurance auxiliaries

• 1. Insurance auxiliaries are units that engage primarily in activities closely related to insurance but which do not themselves incur risks. Insurance auxiliaries include in particular:

• (a) insurance brokers;

• (b) private non-profit institutions serving insurance enterprises and pension funds;

• (c) units whose main activity is to act as supervisory authorities of insurance enterprises and pension funds and of insurance markets.

TREATMENT IN THE ACCOUNTS

• 1. For ease of exposition, the following description of the different types of insurance concentrates on cases where only resident units are involved. At the end of each section, special features for cases involving non-resident units are considered.

Social insurance

Social security schemes of government

• 1. The output produced by those employed in managing these schemes is part of government output, valued at the cost of production. Consequently, no service charge is calculated for social security schemes of government.

Employers' contributions to government social security schemes (D.121) are treated as part of employees' compensation, shown as payable by the employer's sector in the generation of income account and receivable by the household sector in the allocation of primary income account. Employers' contributions reappear in the secondary distribution of income account as part of employers' actual social contributions (D.6111), payable by the household sector and receivable by government. Employees' contributions (D.6112) and contributions by self-employed and non-employed persons (D.6113) are also recorded in the secondary distribution of income account as payable by the household sector and receivable by government. Social security benefits in cash (D.621) are shown in the secondary distribution of income account as payable by government and receivable by households, while social security benefits in kind are shown as item D.6311 and D.6312, payable by government and receivable by households in the redistribution of income in kind account.

• 1. The units managing social security schemes of government are classified in subsector S.1314 ‘Social security funds’. The activity classification according to  NACE Rev. 2 is  class 84.30 ‘Compulsory social security activities’.

When a resident works for a non-resident employer, the employer's contributions are shown as payable by the rest of the world in the external account of primary incomes and current transfers. If the employee also participates in a social security scheme run by a non-resident government, all receivables and payables normally concerning the government sector are receivable or payable by the rest of the world, recorded in the external account of primary incomes and current transfers. However, in the ESA social transfers in kind occur only between resident units. Any benefits from non-resident social security schemes to residents are therefore by definition social benefits other than social transfers in kind (D.62).

When a non-resident works for a resident employer, the employer's contributions are recorded as receivable by the rest of the world in the external account of primary incomes and current transfers. If the non-resident employee is covered by a resident social security scheme, the transactions between the employee and the government sector are recorded in the external account of primary incomes and current transfers. By definition, any benefits to non-resident employees are social benefits other than social transfers in kind (D.62).

An example of the flows recorded for social security schemes of government is shown in Table A.III.1.

Private funded social insurance schemes

• 1. Schemes financed by autonomous funds are treated differently from schemes financed by non-autonomous funds. For autonomous funds, a service charge is calculated as (A):

	total actual contributions earned
plus	total contribution supplements
less	benefits due
less	increases (plus decreases) in pension fund reserves.

• 1. All four items are recorded exclusive of holding gains or losses. Total contribution supplements are identical to property income attributed to policyholders, which is income earned by private social insurance funds by investing their technical and pension reserves. The ESA regards these reserves as owned by the policyholders, who therefore receive the income generated by these reserves. The service charge is recorded as output (P.1) for the autonomous funds and as final consumption expenditure (P.3) for the household sector.

For non-autonomous funds no service charge is calculated. The costs of managing these funds are included with the other elements of costs in the employers' production account.

• 1. The remaining transactions apply to both autonomous and non-autonomous funds. Employers' actual contributions (D.121) are shown as part of compensation of employees, payable by the employer's sector in the generation of income account and receivable by employee households in the allocation of primary income account. The employer's sector may be any institutional sector, including general government and households (as employers). Property income attributed to policyholders (part of D.4) is shown in the allocation of primary income account as payable by the fund's sector and receivable by the household sector. Resident autonomous funds are located in the insurance enterprises and pension funds subsector (S.125). Non-autonomous funds obviously belong to the same sector as the employer in question.  NACE Rev. 2 classifies the activity of pension funds in  class 65.30 ‘Pension funding’.

• 1. Employers' actual contributions are recorded again in the secondary distribution of income account as part of D.6111, payable by households and receivable by the fund's sector. Employees' contributions (D.6112) and contributions by self-employed and non-employed persons (D.6113) are also recorded in the secondary distribution of income account as payable by the household sector and receivable by the fund's sector. The contributions made by employees and by self-employed and non-employed persons equal the direct payments made plus property income attributed to policyholders less service charge (this last being zero for non-autonomous funds). Private funded social benefits, including pensions, are shown in the secondary distribution of income account as payable by funds and receivable by households. By definition, all private funded social benefits are part of D.62, social benefits other than social transfers in kind.

• 1. The entry in the financial account contains two elements:

• (a) prepayments of insurance premiums and reserves for outstanding claims (F.62), which comprise any difference between contributions payable and contributions earned and between benefits due and benefits payable ([^E0119]). By convention this element is shown as a change (negative if necessary) in funds' liabilities and household assets,

• (b) net equity of households in pension funds reserves (F.612), also shown as a change (negative if necessary) in funds' liabilities and household reserves. This element equals employers' and employees' contributions in respect of pensions, as recorded in the secondary distribution of income account, less pensions payable.

• 1. As a consequence of the entry in the financial account, F.612 and F.62 appear in the balance sheets of the household sector (as an asset) and the fund's sector (as a liability).

In the use of disposable income account, an adjustment for change in net equity of households in pension funds reserves (D.8) is recorded as receivable by households and payable by funds. This entry equals the second element of the entry in the financial account.

Employers and general government occasionally make extraordinary payments to private social insurance funds in order to increase the reserves of these funds. Such payments are recorded in the capital account as other capital transfers (D.99), payable by the employer's sector or the government sector and receivable by the fund's sector. As social insurance funds' reserves are treated as if owned by the household sector, an accompanying adjustment between the fund's sector and the household sector is required. This adjustment is recorded as other capital transfers (D.99), payable by the fund's sector and receivable by the household sector.

• 1. If a resident employee works for a non-resident employer, the employer's actual contributions (D.121) are recorded as part of compensation of employees, payable by the rest of the world and receivable by households. When the employer is non-resident, any non-autonomous social insurance fund will also be non-resident, while an autonomous fund may be resident or non-resident. If the employee is covered by a non-resident fund, all flows between the household sector and the fund's sector are shown as transactions between the household sector and the rest of the world. The service charge (in the case of autonomous, on-resident funds) is shown as imports of services (P.72). The change in net equity of insurance technical reserves (F.6) is shown in the financial account of the rest of the world, while the remaining flows are shown in the external account of primary incomes and current transfers.

• 1. If a non-resident employee works for a resident employer, the employer's actual contributions (D.121) are part of compensation of employees, payable by the employer's sector and receivable by the rest of the world. If the non-resident employee is covered by a resident social insurance fund, any service charge is recorded as exports of services (P.62). All other flows between fund and employee are shown as between the fund's sector and the rest of the world.

Especially when non-resident units are involved, all the requisite data are not always available. The calculations of some of the items to be recorded sometimes have to be based on assumptions.

An example of the flows recorded for private funded social insurance schemes is shown in Table A.III.2.

Unfunded social insurance schemes operated by employers

• 1. Similar to schemes financed by non-autonomous funds, the costs of managing unfunded social insurance schemes are included with the other elements of costs on the employer's production account. Thus, no service charge is calculated.

As unfunded social insurance schemes do not form separate institutional units from the employers operating them, all transactions are between the employer's sector and the household sector.

• 1. The ESA regards an employer operating an unfunded scheme as making an imputed contribution to the scheme on behalf of his employees. This imputed social contribution (D.122) is part of compensation to employees and is shown as payable by the employer in the generation of income account and receivable by households in the allocation of primary income account. The employer's imputed contribution is shown again in the secondary distribution of income account as item D.612, payable by households and receivable by the employer. The amount of this contribution should be determined by reference to the employer's future obligations to provide benefits. In practice, however, the contribution is usually set equal to benefits payable in the current period (less employees' social contributions).

• 1. Actual contributions by employees, if any, are shown as part of D.6112, payable by households and receivable by the employer's sector. The secondary distribution of income account also shows pensions and other benefits as part of D.62, receivable by households and payable by the employer.

Unfunded social insurance schemes obviously belong to the same institutional sector as the employer in question.  NACE Rev. 2 regards them as an ancillary activity.

• 1. If a resident works for a non-resident employer operating an unfunded social insurance scheme, all transactions are between the household sector and the rest of the world, recorded in the external account of primary incomes and current transfers. If a non-resident works for a resident employer operating such a scheme, all transactions are between the rest of the world and the employer's sector, shown in the external account of primary incomes and current transfers.

An example of the flows recorded for unfunded social insurance schemes operated by employers is shown in Table A.III.3.

Other insurance

• 1. The output of other insurance services, both life and non-life, is calculated as (B):

	actual premiums earned
plus	premium supplements
less	claims due
less	increases (plus decreases) in technical provisions against outstanding risks and technical provisions for with-profits insurance.

• 1. Actual premiums earned are the actual premiums that cover the risks incurred during the current period. Actual premiums earned are usually not equal to actual premiums receivable, as the latter often cover risks incurring in both the current and subsequent periods.

Premium supplements are identical to property income attributed to policyholders, which is the entire income earned by insurance enterprises by investing their insurance technical reserves, excluding any income from insurance enterprises' own funds. Insurance technical reserves contain two elements: (a) prepayments of insurance premiums and reserves for outstanding claims, arising from the difference between premiums earned and premiums receivable and between claims payable and claims due, and (b) technical provisions against outstanding risks and technical provisions for with-profits insurance. The latter element applies only to life insurance. Insurance technical reserves are usually invested in financial assets which yield income in the form of interest or dividends. However, these reserves may also be invested in real estate, for example, in which case income is earned as operating surplus.

• 1. Claims due cover events that occur within the current period. Frequently, claims do not become payable until a later period than when the event giving rise to them occurred. Claims due are therefore not equal to claims payable.

Changes in technical provisions against outstanding risks and technical provisions for with-profits insurance consist of allocations to technical provisions against outstanding risks and provisions for with-profits insurance policies to build up the capital sums guaranteed under these policies. These provisions relate to life insurance only.

All four items in equation (B) should be measured excluding holding gains and losses.

Other life insurance

• 1. Total output of other life insurance is calculated according to equation (B) and shown as item P.1 in the production account of the insurance enterprises and pension funds subsector. Unless consumed by non-resident households, the output of other life insurance is entirely used as final consumption by resident households. The output of life insurance services should be distributed between the household sector and the rest of the world in proportion to premiums payable by resident and non-resident households. Life insurance services consumed by residents are shown as part of households' final consumption expenditure (P.3), while services consumed by non-residents are part of exports of services (P.62).

• 1. Two further transactions are recorded for other life insurance. In the allocation of primary income account, property income attributed to policyholders (part of D.4) is shown as payable by the insurance enterprises' sector and receivable by households. In the financial account, the item net equity of households in life insurance reserves is shown as a change (negative if necessary) in households' assets and life insurance enterprises' liabilities. The change in the net equity of households is due to changes in life insurance reserves, that is technical provisons against outstanding risks and technical provisions for with-profits insurance (F.611). The change in net equity therefore equals actual premiums payable (not earned) plus premium supplements less claims receivable (not due) and less service charge.

• 1. Because of this entry in the financial account, F.611 is also shown in the balance sheets of the household sector (as an asset) and the insurer's sector (as a liability).

As with the service charge, property income attributed to policyholders (= premium supplements) should be distributed between the household sector and the rest of the world in proportion to premiums.

Institutionally, life insurance enterprises are classified in S.125 ‘Insurance corporations and pension funds’. The activity classification according to  NACE Rev. 2 is  class 65.11 ‘Life insurance’.

• 1. When a resident life insurance enterprise provides services to non-resident households, the service charge is recorded as exports of services (P.62). Property income attributed to policyholders is shown as payable by the insurance sector and receivable by the rest of the world in the external account of primary incomes and current transfers. The change in net equity of non-resident households on life insurance reserves is shown in the financial account of the rest of the world as a change in the rest of the world's assets and the insurance sector's liabilities.

When resident households purchase cover from non-resident life insurers, the procedure is in principle straightforward: the service charge is recorded as imports of services (P.72), attributed property income is shown in the external account of primary incomes and current transfers as payable by the rest of the world and receivable by households, and change in net equity is shown as a change in households' assets and the rest of the world's liabilities. However, the data required to calculate these items are normally not available; usually only premiums payable are known. Assumptions are therefore necessary, for example applying the ratios of service charge to premiums and attributed property income to premiums for resident life insurers to the premiums paid by resident households to non-resident life insurers.

An example of the flows recorded for other life insurance is shown in Table A.III.4.

Other non-life insurance

• 1. The output (P.1) of other non-life insurance enterprises is calculated according to equation (B) and shown in the production account of the insurance enterprises and pension funds subsector. Non-life insurance services may be used as intermediate consumption (P.2) by any resident sector, as final consumption by the household sector when they are part of households' final consumption expenditure (P.3), or as exports (P.62). Non-life insurance services used as intermediate consumption should be broken down by industry.

Equation (B) should be used to estimate the total value of non-life insurance output. The output should then be distributed among user sectors and industries in proportion to actual premiums payable by each sector. Whereas all resident sectors except households use non-life insurance services for intermediate consumption only, the household sector uses them for both final and intermediate consumption. Households' use of non-life insurance services should be broken down into intermediate and final consumption in proportion to actual premiums payable. Premiums clearly associated with the productive activity of unincorporated enterprises should be regarded as related to intermediate consumption, while the remaining premiums paid by households should be considered as being related to final consumption.

• 1. In the allocation of primary income account, property income attributed to policyholders is recorded as part of D.4, payable by the insurance sector and receivable by the policyholder sectors. Ideally, property income attributed to policyholders should be distributed among sectors in proportion to the reserves attributed to each policyholder sector, but this is hardly feasible in practice. Property income attributed to policyholders should therefore be distributed in proportion to actual premiums paid by each policyholder sector.

• 1. In the secondary distribution of income account net premiums earned are shown as payable by all policyholder sectors and receivable by the insurance sector. Net premiums earned are calculated as actual premiums earned plus property income attributed to policyholders less the value of services consumed. By equation (B), net premiums earned equal claims due ([^E0120]). The secondary distribution of income account also shows claims due as payable by the insurance sector and receivable by all policyholder sectors. Both net premiums earned and claims due are part of item D.7, ‘Other current transfers’.

Some claims arise because of damage or injuries that the policyholder causes to the property or persons of third parties. In such cases, valid claims are recorded as being payable directly by the insurance enterprise to the injured parties and not indirectly via the policyholder.

• 1. In the financial account, net equity of policyholders in non-life insurance reserves is shown as a change in assets of policyholder sectors and a change in liabilities of the insurance sector. The change in net equity, classified as F.62, is due to prepayments of premiums and reserves for outstanding claims. F.62 also appears as a liability in the non-life insurer's balance sheet and an asset in policyholders' balance sheets.

Non-life insurance enterprises belong to  NACE Rev. 2 class 65.12 ‘Non-life insurance’. Their institutional sector is S.125, ‘Insurance corporations and pension funds’.

• 1. When non-resident units purchase cover from resident non-life insurers, the service charge is shown as exports of services (P.62). Property income attributed to policyholders, net premiums earned and claims due are all recorded in the external account of primary incomes and current transfers, while net equity of policyholders in non-life insurance reserves is shown in the financial account of the rest of the world. In this case, the calculations for the rest of the world are no more difficult than those for any resident policyholder sector.

When resident units are insured by non-resident non-life insurers, the data situation is far more difficult; only data on premiums payable and claims receivable are normally available. A simplified method, ignoring non-life insurance reserves and their subsequent property income, is therefore used: the service charge, which is recorded as imports of services (P.72), is calculated as premiums payable less claims receivable ([^E0121]). Net premiums payable are calculated as premiums payable less service charge, thus equalling claims receivable. Both net premiums payable and claims receivable are shown in the external account of primary incomes and current transfers.

An example of the flows recorded for other non-life insurance is shown in Table A.III.5.

Reinsurance

• 1. The ESA records reinsurance transactions in a simpler way than direct insurance transactions (the latter meaning transactions between insurance enterprises and ordinary policyholders). Instead of showing the flows involved (premiums earned, claims due, commissions, etc.) separately, reinsurance transactions are simply shown as a service delivered from reinsurer to direct insurer. The value of this service is measured as the balance of all flows occurring between reinsurer and direct insurer.

For resident life and non-life insurance enterprises, reinsurance services produced are shown as output (P.1), while reinsurance services received are shown as intermediate consumption (P.2). Reinsurance services delivered from resident reinsurers to non-resident insurers are shown as exports of services (P.62), while services delivered from non-resident reinsurers to resident insurers are recorded as imports of services (P.72).

• 1. For resident insurance enterprises data on output and intermediate consumption of reinsurance services can be obtained from insurance statistics. Calculating imports and exports of reinsurance services may be more difficult, depending mainly on the availability and quality of balance of payments statistics. However, the external balance of reinsurance services can easily be derived from insurance statistics.