Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union Text with EEA relevance

• If any of the conditions are not satisfied, the payments are recorded as payments for a service.

• 15.40Governments issue emission permits to control total emissions. Such permits do not involve the use of a natural asset, as no value is placed on the atmosphere, so it is not an economic asset and the permit fees are therefore classified as taxes. The permits are tradable and there will be an active market in them. The permits therefore constitute assets and shall be valued at the market price for which they can be sold.

Public-private partnerships (PPPS)

• 15.41Public-private partnerships (PPPs) are long-term contracts between two units, whereby one unit acquires or builds an asset or set of assets, operates it for a period and then hands the asset over to a second unit. Such arrangements are usually between a private enterprise and government but other combinations are possible, with a public corporation as either party or a private NPI as the second party.

• Governments engage in PPPs for a variety of reasons, such as the hope that private managements will lead to more efficient production and that access to a broader range of financial sources can be obtained and the wish to reduce government debt.

• In the contract period the PPP contractor has the legal ownership. Once the contract period is over, the government has both economic and legal ownership.

• More details about the treatment of PPPs are provided in Chapter 20 (government accounts).

Service concession contracts

• 15.42Service concession contracts provide a company the exclusive right to provide certain services. For example, in case of a public service concession, a private company enters into an agreement with the government to have the exclusive right to operate, maintain and carry out investment in a public utility (such as a water supply system or a toll highway) for a given number of years. Service concession contracts shall not be recorded as assets where they are not transferable or no value can be realised through transferring them.

Marketable operating leases (AN.221)

• 15.43Marketable operating leases are third-party property rights relating to non-financial assets other than natural resources. The lease should confer economic benefits to the holder in excess of the fees payable and the holder should be able to realise those benefits through transferring them. The value of the lease is the benefit to the holder in excess of the value accruing to the issuer. Marketing operating leases can include all kinds of rental and operating lease contracts. For example, a tenant can sublet an apartment to a third party.

Entitlements to future goods and services on an exclusive basis (AN.224)

• 15.44Contracts for future production may also give rise to third-party property rights assets. The value of such contracts is the benefit to the holder in excess of the value accruing to the issuer. Examples are:

• (a) exclusive rights to have a person work for them (e.g. football players) or to publish literary works or musical performances. The value of such rights is the profit that can be made on transferring the rights above the costs of cancelling the existing contract;

• (b) time share arrangements. Only part of the time share arrangements has to be regarded as the acquisition of an asset:
• (1) if the owner has a nominated space, available in perpetuity, is eligible to act as part of the management committee for the scheme, or can sell or bequeath the allocation at will, then the arrangement is most likely to be an asset of the same type as a house;
• (2) if the owner has a fixed agreement to have some form of accommodation available at a given period for a fixed length of time, it is likely that this represents a pre-paid lease, i.e. pre-paid final consumption expenditure by households;
• (3) this pre-paid lease could be sublet occasionally or sold for the rest of the period of the lease as a transferable operating lease;
• (4) a participant in a points-based scheme may have an account that is receivable only by way of an asset.

CHAPTER 16

INSURANCE

INTRODUCTION

• 16.01Insurance is an activity whereby institutional units or groups of units protect themselves against the negative financial consequences of specific uncertain events. Two types of insurance can be distinguished: social insurance and other insurance.

• 16.02Social insurance is a scheme that covers social risks and needs. It is often organised collectively for a group; participation in the scheme is generally obligatory or encouraged by a third party. Social insurance comprises: social security schemes imposed, controlled and financed by the government; and employment-related schemes provided or operated by employers on behalf of their employees. Social insurance is described in Chapter 17.

• 16.03Insurance other than social insurance covers against events such as death, survival in life, fire, natural disasters, flooding, car accidents, etc. Insuring against death and survival in life is known as life insurance, and insuring against all other events is known as non-life insurance.

• 16.04This Chapter is concerned with life and non-life insurance. It describes how insurance activities are recorded in the accounts.

• 16.05The rights and obligations of insurance are defined by an insurance policy. The policy is an agreement between an insurer and another institutional unit, called the policyholder. Under the agreement, the policyholder makes a payment called a premium to the insurer and when a specified event occurs, the insurer makes a payment called a claim to the policyholder or a nominated person. In this way, the policyholder protects against certain forms of risk; by pooling the risks the insurer aims to receive more from the receipt of premiums than it has to pay out as claims.

• 16.06The insurance policy defines the roles of the parties involved, which are as follows:

• (a) the insurer providing cover;

• (b) the policyholder responsible for paying premiums;

• (c) the beneficiary who receives compensation;

• (d) the insured person or object that is subject to the risk.

• In practice, the policyholder, the beneficiary and the insured can be the same person. The policy lists those roles and specifies the person corresponding to each role.

• 16.07The most common form of insurance is called direct insurance, where institutional units insure themselves with an insurer against the financial consequences of specific risks. But direct insurers may in turn insure themselves, by insuring part of the directly insured risks with other insurers. This is called reinsurance, and the providers of this are called reinsurers.

Direct insurance

• 16.08There are two types of direct insurance: life insurance and non-life insurance.

• 16.09 Definition: life insurance is an activity whereby a policyholder makes regular payments to an insurer in return for which the insurer guarantees to provide the beneficiary with an agreed sum, or an annuity, at a given date or earlier if the insured person dies beforehand. A life policy can grant benefits arising from a series of risks. For example, an old-age life insurance policy can grant a benefit when the insured becomes 65 years of age and, after the death of the insured, can grant a benefit to the surviving spouse until his death.

• 16.10Life insurance also covers supplementary insurance against personal injury including incapacity for employment, insurance against death resulting from an accident and insurance against disability resulting from an accident or sickness.

• 16.11Some classes of life insurance provide compensation in case the insured event occurs, e.g. insurance that is linked to a mortgage loan and only pays a benefit to redeem the mortgage if the income earner dies before maturity of the corresponding loan. Most of such classes contain a significant savings element combined with an element of risk coverage. Given the large savings element, life insurance is seen as a form of saving, and the corresponding transactions are recorded in the financial account.

• 16.12 Definition: non-life insurance is an activity whereby a policyholder makes regular payments to an insurer in return for which the insurer guarantees to provide the beneficiary with an agreed sum on the occurrence of an event other than the death of a person. Examples of such events are: accidents, sickness, fire, etc. Accident insurance that covers life related risks is classified as non-life insurance in most European countries.

• 16.13A life policy that provides a benefit in the case of death within a given period but in no other circumstances, usually called term insurance, is regarded in the national accounts as non-life insurance because a claim is payable only if a specified contingency occurs and not otherwise. In practice, because of the way in which insurance units keep their accounts, it may not always be possible to separate term insurance from life insurance. In such circumstances, term insurance can be treated in the same way as life insurance.

• 16.14Life and non-life insurance both involve spreading risk. Insurers usually receive small regular payments of premiums from policyholders and pay larger sums to claimants when the events covered by the policy occur. For non-life insurance, the risks are spread over the whole population that takes out the insurance policies. An insurer determines the premiums charged for providing an insurance service in a year according to the amount of claims it expects to pay in the same year. Typically, the number of claimants is much smaller than the number of policyholders. For an individual non-life policyholder there is no relationship between the premiums paid and the claims received, even in the long run, but the insurer establishes such a relationship for every class of non-life insurance on a yearly basis. For life insurance, a relationship between premiums and claims over time is important both to the policyholders and to the insurer. For someone taking out a life policy, the benefits to be received are expected to be at least as great as the premiums paid up until the benefit is due and is a form of saving. The insurer must combine this aspect of a policy with the actuarial calculations about the insured population concerning life expectancy, including the risk of fatal accidents, when determining the relationship between the levels of premiums and benefits. Further, in the interval between the receipt of premiums and the payment of benefits, the insurer earns income from investing a part of the premiums received. This income also affects the levels of premiums and benefits set by the insurers.

• 16.15There are significant differences between life and non-life insurance that lead to different types of entries in the accounts. Non-life insurance consists of redistribution in the current period between all policyholders and a few claimants. Life insurance mainly redistributes premiums paid over a period of time as benefits paid later to the same policyholder.

Reinsurance

• 16.16 Definition: an insurer may protect against an unexpectedly large number of claims, or exceptionally heavy claims, by taking out a reinsurance policy with a reinsurer. Reinsurance corporations are concentrated in a limited number of financial centres, and so many of the reinsurance flows are transactions with the rest of the world. It is common for reinsurers to take out reinsurance policies with other reinsurers to spread their risks further. This extended reinsurance is called retrocession.

• 16.17Limitation of risks can also be achieved when a group of insurers called underwriters jointly accept the risks associated with a single policy. Each individual insurer is only responsible for its own share of the policy, receives the corresponding share of the premium and pays the same share in the case of a claim or benefit paid. Management of the policy is either by the lead-manager or by the insurance broker. Lloyds of London is an example of an insurance market where direct and indirect risks are spread over a large number of underwriters.

• 16.18Various options exist with the direct insurer to organise indirect coverage against the risks the insurer has accepted. The following classes of reinsurance are distinguished:

• (a) proportionate reinsurance where the policyholder cedes to a reinsurer an agreed percentage of all risks, or of all risks of a specified portfolio of direct insurance policies. This means that the direct insurer transfers the corresponding percentage of the premiums to the reinsurer who then meets the same proportion of the claims when it incurs. In such cases, any reinsurance commission paid by the reinsurer to the policyholder is treated as a reduction in reinsurance premiums written;

• (b) non-proportionate reinsurance known as excess of loss reinsurance, where the reinsurer is only at risk if the amount of the direct claim exceeds an agreed threshold. If there are no or few direct claims above the threshold, the reinsurer may pass a share of its profits to the direct insurer. Profit sharing is treated in the accounts as current transfer from the reinsurer to the direct insurer, in a similar way to the payment of claims.

The units involved

• 16.19The institutional units involved in direct insurance and reinsurance are pre-eminently insurers. It is possible for another type of enterprise to carry out insurance as a non-principal activity, but usually the legal regulations surrounding the conduct of insurance mean that a separate set of accounts covering all aspects of the insurance activity must be kept, and so a separate institutional unit, classified to the insurance corporations (S.128) and pension funds (S.129) subsectors, is identifiable. Government may conduct other insurance activities, but again it is likely that a separate unit can be identified. Having noted that other sectors may be involved, in what follows it is assumed that insurers, either resident or non-resident, carry out all insurance.

• 16.20Units that are primarily engaged in activities closely related to insurance, but do not themselves incur risks, are insurance auxiliaries. Such units are classified within the financial auxiliaries subsector (S.126) and include for example the following:

• (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, pension funds and of insurance markets.

OUTPUT OF DIRECT INSURANCE

• 16.21The insurance company accepts a premium from a client and holds it until a claim is made or the period of the insurance expires. In the meantime, the insurance company invests the premium and the investment income is an extra source of funds from which to meet any claim due. The insurance company sets the level of the premiums to be such that the sum of the premiums plus the investment income earned on them less the expected claim will leave a margin that the insurance company can retain; this margin represents the output of the insurance company. The output of the insurance industry is measured reflecting the premium setting policies of the insurers. To that end, four separate items need to be defined. These are

• (a) premiums earned;

• (b) premium supplements;

• (c) claims incurred, or benefits due;

• (d) insurance technical reserves.

• Each of these is discussed in turn before discussing the measurement of output for direct non-life insurance, direct life insurance and reinsurance respectively.

Premiums earned

• 16.22 Definition: premiums earned are the proportion of premiums written that have been earned during the accounting period. Premiums written cover the period contracted in the insurance policy. The difference between premiums written and premiums earned are amounts set aside, and included in the reserves for unearned premium. Such amounts are treated as assets of the policyholders. The concept of premium earned in insurance accounting is consistent with the accruals recording principle of national accounts.

• 16.23The insurance premium is either a regular premium payable monthly or yearly, or a single premium paid usually at the start of the insured period. Single premiums are usual for the insurance of risks associated with large events, such as the construction of large buildings or equipments and the road, train, sea- or air transport of goods.

• 16.24The premiums earned in the year in question take the following form:

• premiums written

• plus the reserves for unearned premiums at the beginning of the accounting year

• less the reserves for unearned premiums at the end of the accounting year.

• Or presented differently, it takes the form of:

• premiums written

• less the change (less increase or plus decrease) in the reserves for premiums unearned.

• 16.25The reserves for unearned premiums and other reserves are included within non-life insurance technical reserves (AF.61) and life insurance technical reserves (AF.62). A description of insurance technical reserves is given in paragraphs 16.43 to 16.45.

• 16.26Policyholders often have to pay a dedicated tax on payment of the insurance premium. Life insurance premiums are excluded from this insurance tax in many countries. As the insurers have to transfer this tax to government, the relevant amounts do not enter the annual accounts of insurers. Only a relatively small amount — the residual amount concerning the year that still has to be transferred to government — could enter the insurers' balance sheet under trade credit. The tax payments are not recorded as such in the accounts of insurers. Such a tax is treated as a tax on products in national accounts. Policyholders are assumed to pay such amounts directly into the tax authorities' accounts.

Premium supplements

• 16.27 Definition: premiums supplements are the income earned from the investment of the insurance technical reserves of the insurers, which represent liabilities towards the policyholders.

• 16.28For life insurance in particular, but also to a lesser extent for non-life insurance, the total amount of benefits due or claims incurred in a given period often exceeds the premiums earned. Premiums are usually paid regularly, often at the start of an insurance period, whereas claims are incurred later, and in the case of life insurance benefits are often due many years later. In the time between the premium being paid and the claim being payable, the sum involved is at the disposal of the insurer to invest and earn income from it. Such amounts are called insurance technical reserves. The income earned on the reserves allows the insurers to charge lower premiums than would be the case otherwise. The measure of the service provided takes account of the size of this income as well as the relative size of premiums and claims.

• 16.29For non-life insurance, even though a premium may be payable at the start of a period of cover, the premiums are only earned on a continuous basis as the period passes. At any point before the end of the cover, the insurer holds an amount due to the policyholder relating to services and possible claims to be provided in the future. This is a form of credit extended by the policyholder to the insurer described as unearned premiums. Similarly, although claims become due for payment by the insurer when the contingency specified in the policy happens, they may not be paid until some time later, often because of negotiation about the amounts due. This is another similar form of credit, described as reserves against claims outstanding.

• 16.30Similar reserves exist for life insurance but in addition there are two other elements of insurance reserves, actuarial reserves for life insurance and reserves for with-profit insurance. They represent amounts set aside for payments of benefits in future. The reserves are generally invested in financial assets and the income is in the form of investment income. They may be used to fund economic activity such as real estate, to generate a net operating surplus either in a separate establishment or as a secondary activity.

• 16.31All investment income attributed to policyholders is shown as payable to the policyholders in the primary distribution of income account. For non-life insurance, the same amount is then repaid to the insurer as premium supplements in the secondary distribution of income account. For life insurance, the premiums and premium supplements are shown in the financial account.

Adjusted claims incurred and benefits due

• 16.32 Definition: claims incurred and benefits due are the financial obligations of the insurers with respect to the beneficiary concerning the risks that the event realises in the period in question as defined by the policy.

• 16.33The concept of claims incurred in non-life insurance and benefits due in life insurance is consistent with the accruals basis of measurement in national accounts.

Non-life insurance adjusted claims incurred

• 16.34Claims can be distinguished between claims paid and claims incurred. Claims incurred refer to the amounts due from insured risks that have been realised in the year. Whether the policyholder has reported the corresponding event is irrelevant. Part of the claims will be paid in the next year or even later. On the other hand claims that are the effect of events that have occurred in previous years are paid in the current year. The unpaid part of the claims incurred is added to the reserve for claims outstanding.

• 16.35Non-life insurance claims incurred in the calendar year take the following form:

• claims paid

• less the reserve for claims outstanding at the beginning of the accounting year

• plus the reserve for claims outstanding at the end of the accounting year.

• Or presented differently, they take the form of:

• claims paid

• plus the change (plus increase or less decrease) in the reserves for claims outstanding.

• 16.36Any claims-related costs undertaken by the insurer, either external or internal, are not included in claims incurred. Such costs may consist of: costs of acquisition, policy management, investment management, and claims handling. Some costs might not be separately identifiable in the accounting source data. The external costs include expenditure for works that the insurer commissioned to another unit, thus recorded in the accounts as intermediate consumption. The internal costs include expenditure for works performed by the insurers' own employees, thus recorded in the accounts as labour costs.

• 16.37In the event of catastrophes, the losses incurred shall not affect the value of claims. The catastrophic losses shall be recorded as a capital transfer from the insurer to the policyholder. The advantage of such recording is that the disposable income of the policyholder does not increase counter-intuitively as would be the case if the claims were recorded otherwise (see paragraphs 16.92 and 16.93).

• 16.38The production of insurance services is a continuous process, not just when the risk occurs. However, the level of claims incurred by policyholders of non-life insurance varies from year to year and there may be events that cause a particularly high level of claims. Neither the volume nor the price of insurance services is directly affected by the volatility of claims. Insurers set the level of premiums on the basis of their own estimation of the likelihood of claims incurring. For this reason, the formula used for the calculation of output uses adjusted claims incurred, which is an estimate corrected for volatility in claims.

• 16.39The estimate for adjusted claims incurred may be derived statistically in an expectations approach based on previous experience of the level of claims. In considering the past history of claims payable, however, allowance must be made for the share of such claims that is met under the terms of the direct insurer's reinsurance policy. For example, when the direct insurer has an excess of loss reinsurance, known as non-proportionate reinsurance, it sets the level of premiums to cover losses up to the maximum loss covered by its reinsurance policy plus the reinsurance premium it must pay. Under a proportionate reinsurance policy, it sets its premiums to cover the proportion of claims it has to pay plus the reinsurance premium.

• 16.40An alternative method of adjusting claims incurred for volatility is to use accounting data on change in own funds and in equalisation reserves. The equalisation reserves are amounts that insurers set aside in compliance with legal or administrative requirements to cover irregular or unforeseeable large claims in the future. Such amounts are included within non-life insurance technical reserves (AF.61).

Life insurance benefits due

• 16.41Life insurance benefits due are the amounts payable under the policy in the accounting period in question. No adjustment for unexpected volatility is necessary in the case of life insurance.

• 16.42Any benefits-related costs shall not be included within the benefits due, but recorded as intermediate consumption and labour costs.

Insurance technical reserves

• 16.43 Definition: insurance technical reserves are the amounts that insurers set aside. The reserves are assets to the policyholders and liabilities to the insurers. The technical reserves can be distinguished between non-life and life insurance and annuities.

• 16.44In accordance with Council Directive 91/674/EEC ([^E0020]), seven types of technical reserves are distinguished. In each case the amount gross of reinsurance, the amount ceded to reinsurers and the net amount are shown in the balance sheet. The seven categories are as follows:

• (a) reserve for unearned premiums — the difference between written premiums and earned premiums. This reserve can, depending on the national legislation, include a separate element relating to unexpired risks;

• (b) reserves for life insurance — such reserves reflect the present value of the expected future benefits (including but not confined to declared bonuses) less the present value of future premiums. Supervisory authorities may set a ceiling to the discount rate used in the calculation of present value;

• (c) reserve for claims outstanding — the difference between incurred and paid claims. It equals the total estimated ultimate cost to an insurance undertaking of settling all claims arising from events which have occurred up to the end of the financial year, whether reported or not, less amounts already paid in respect of such claims;

• (d) reserve for bonuses and rebates (unless shown within the category referred to in point (b) — comprising the amounts intended for policyholders or contract beneficiaries by way of bonuses and rebates, to the extent that such amounts have not already been credited to policyholders or contract beneficiaries;

• (e) equalisation reserve comprises amounts set aside in compliance with legal or administrative requirements to equalise fluctuations in loss ratios in future years or to provide for special risks. National authorities may not permit this reserve;

• (f) other technical reserves comprise, inter alia, the reserve for unexpired risks if not included within the category referred to in point (a). This item might also include ageing reserves taking into account the effect of ageing on the amount of claims, e.g. with health insurance;

• (g) technical reserves for life insurance policies where the investment risk is borne by the policyholders. This item shall comprise technical reserves constituted to cover liabilities to policyholders in the context of life insurance policies where the value of the return is determined by reference to investments for which the policyholder bears the risk, or by reference to an index, as is the case with index-linked life insurance. This item shall also comprise the technical reserves concerning tontines.

• 16.45When deriving the changes in the insurance technical reserves (F.61 and F.62) used in the calculations of output, realised and unrealised holding gains and losses are not included.

Defining insurance output

• 16.46Insurers provide an insurance service for their clients, but do not charge explicitly for their service.

• 16.47The insurer collects premiums and pays claims or benefits on the occurrence of an insured event. The claims or benefits compensate the beneficiary for the financial consequences of the insured event.

• 16.48The insurance technical reserves are funds that insurers use to invest and to earn income. Such funds and the corresponding investment income (premium supplements) are a liability towards the beneficiaries.

• 16.49This section describes the information needed to calculate the output for direct insurance and reinsurance services.

Non-life insurance

• 16.50The output of the insurer is the service provided to the beneficiaries.

• 16.51If an expectations approach is being used, the formula to calculate output is:

• premiums earned

• plus premium supplements

• minus adjusted claims incurred;

• where adjusted claims incurred is corrected for the volatility in claims using historical data or accounting data on changes in the equalisation reserves and own funds. Premium supplements are less volatile than claims, and no adjustment for volatility is necessary. In estimating adjusted claims, information is broken down by product, for example motor insurance, buildings insurance, etc.

• If the necessary accounting data are not available and the historical statistical data are not sufficient to allow reasonable average estimates of output to be made, the output of non-life insurance may be estimated as the sum of costs (including intermediate costs, labour and capital costs) plus an allowance for 'normal profit'.

Life insurance

• 16.52The output of direct life insurance is calculated separately as:

• premiums earned

• plus premium supplements

• minus benefits due

• minus increases (plus decreases) in technical reserves and with-profits insurance.

• 16.53If adequate data are not available for the calculation of life insurance according to this formula, an approach based on the sum of costs, similar to that described for non-life insurance, is to be used. As for non-life insurance, an allowance for normal profits is included.

• 16.54In the calculation of output, holding gains and losses must not be included.

Reinsurance

• 16.55The formula to calculate the output of reinsurance services is analogous to that for direct insurance. However, because the primary motivation of reinsurance is to limit the direct insurer's exposure to risk, a reinsurer deals with exceptionally large claims as a matter of normal business. For this reason, and because the market for reinsurance is concentrated in relatively few large firms worldwide, it is less likely that the reinsurer will experience an unexpectedly large loss than a direct insurer does, especially in the case of excess of loss reinsurance.

• 16.56The output of reinsurance is measured in the same way as the output of direct non-life insurance. However, there are some payments peculiar to reinsurance. Such payments are commissions payable to the direct insurer under proportionate reinsurance and profit sharing in excess of loss reinsurance. Once these are taken into account the output of reinsurance is calculated as:

• premiums earned less commissions payable

• plus premium supplements

• minus both adjusted claims incurred and profit sharing.

TRANSACTIONS ASSOCIATED WITH NON-LIFE INSURANCE

• 16.57This section describes the set of entries recording the implications of a non-life insurance policy. Policies may be taken out by businesses, households as individuals and units in the rest of the world. However, when a policy taken out by a member of a household qualifies as social insurance, the entries required are as described in Chapter 17.

Allocation of insurance output among users

• 16.58The output of non-life insurers is described in paragraph 16.51. The value of the output of insurers is recorded as a use as follows:

• (a) intermediate consumption of businesses, including the following sectors: non-financial corporations (S.11), financial corporations (S.12), general government (S.13), households as employers (S.141) and own-account workers (S.142), or non-profit institutions serving households (S.15);

• (b) final consumption expenditure of households as individuals (S.143 and S.144); or

• (c) exports to non-resident policyholders (S.2).

• 16.59The value of output is allocated to users according to the type of insurance.

• 16.60Alternatively, the value of output is allocated as uses to policyholders in proportion to their actual premiums payable.

• 16.61The allocation of output to intermediate consumption is broken down by industry.

Insurance services provided to and from the rest of the world

• 16.62Resident insurers may provide insurance cover to households and businesses in the rest of the world, and resident households and businesses may purchase cover from insurers in the rest of the world. The investment income attributed by resident insurers to policyholders includes an allocation to policyholders in the rest of the world. Such non-resident policyholders then also pay premium supplements to the resident insurer.

• 16.63Similar considerations also apply to the treatment of resident businesses and households taking out policies with non-resident insurers. Resident policy holders receive imputed investment income from abroad and pay premiums and supplements to abroad. Estimation of the size of such flows is difficult, especially when there is no resident insurer against which to make comparisons. Counterpart data may be used to make estimates for the national economy. The level of transactions by residents has to be known and the ratio of premium supplements to actual premiums in the economy providing the services can be used to estimate the investment income receivable and premium supplements payable.

The accounting entries

• 16.64Altogether six pairs of transactions are recorded in respect of non-life insurance that is not part of social insurance; two pairs relating to the measurement of the production and consumption of the insurance service, three pairs relating to distribution and one in the financial account. Under exceptional circumstances, a seventh transaction relating to distribution may be recorded in the capital account. The value of the output of the activity, the investment income to be attributed to the policyholders and the value of the service charge are calculated specifically for non-life insurance in the manner described below.

• 16.65The production and consumption transactions are as follows:

• (a) since all such activity by resident institutional units is undertaken by insurers, the output (P.1) is recorded in the production account of insurers;

• (b) the service may be consumed by any of the sectors of the economy or by the rest of the world; the value of the service is payable to insurers. Payments by business constitute intermediate consumption (P.2), recorded in their production account. Insurance payments by households as individuals are final consumption expenditure (P.3), recorded in the use of income account. Payments by the rest of the world are recorded as exports of services (P.62) in the external account of goods and services.

• 16.66The distributive transactions are investment income attributed to policyholders in respect of non-life insurance, net non-life insurance premiums, and insurance claims:

• (a) investment income from investing non-life insurance technical reserves is attributed to policyholders (D.441). Thus it is recorded as payable by insurers and as receivable by all sectors and the rest of the world. The investment income shall be allocated among policyholders in proportion of their non-life technical reserves, or alternatively in proportion to the actual premium written (payable). Both payables and receivables are recorded in the allocation of primary income account;

• (b) net non-life direct insurance premiums (D.711) are the amounts of premiums and investment income used to finance expenditures of the insurers. Such premiums are calculated as premiums earned plus premium supplements less the output value of the insurers. Those net premiums are recorded as payable by all sectors of the economy or the rest of the world and as receivable by insurers. The allocation of net premiums between sectors is carried out according to the allocation of the output;

• (c) non-life direct insurance claims (D.721) are amounts in respect of which insurers become liable to the policyholder when an event occurs. The insurance claims are recorded as receivable by all sectors of the economy and the rest of the world and as payable by the insurers. Both net premiums and claims are recorded in the secondary distribution of income account. 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 directly payable by the insurer to the injured parties and not indirectly via the policyholder;

• (d) claims arising from catastrophic losses are other capital transfers (D.99) rather than current transfers, and they are recorded in the capital account as payable to policyholders by insurers;

• (e) the financial balance sheet records the non-life insurance technical reserves (AF.61). Such reserves are recorded as liabilities of insurers and assets of all sectors and the rest of the world. The reserves consist of prepayments of premiums and payments of claims. A breakdown of this category is not required, although both components are needed in the calculation of premiums earned and claims incurred.

• 16.67An example of the accounting records for such flows is shown in Table 16.1.

Table 16.1

Non-life insurance

Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Uses	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources	Resources
			S.1	S.15	S.14	S.13	S.12	S.11			S.11	S.12	S.13	S.14	S.15	S.1
	Corresponding entries of the	Corresponding entries of the															Corresponding entries of the	Corresponding entries of the
Total	Goods and services account	Rest of the world account	Total economy	NPISHs	Households	General government	Financial corporations	Non-financial corporations		Transactions and balancing items	Non-financial corporations	Financial corporations	General government	Households	NPISHs	Total economy	Rest of the world	Goods and services account	Total
										External account
0		0							P.62	Exports in services								0	0
0	0								P.72	Imports in services							0		0
										Production account
6	6								P.1	Output		6				6			6
4		0	4	0	3	0	0	1	P.2	Intermediate consumption								4	4
										Distribution of primary income account
6			6				6		D.441	Property income attributable to insurance policy holders	5	0	0	1	0	6	0		6
										Secondary distribution of income account
44		1	43	0	31	4	0	8	D.711	Net non-life insurance premiums		44				44			44
45		0	45				45		D.721	Non-life insurance claims	6	0	1	35	0	42	3		45
										Use of disposable income account
2			2		2				P.3	Final consumption expenditure								2	2
										Financial balance sheet (opening)
74		0	74		40	0	9	25	AF.61	Non-life insurance technical reserves		74				74			74
										Financial balance sheet (closing)
81		0	81	0	44	0	11	25	AF.61	Non-life insurance technical reserves		81				81			81
										Financial transaction
7		0	7	0	4	0	2	1	F.61	Non-life insurance technical reserves		7				7			7
										Revaluation account
0		0	0	0	0	0	0	0	AF.61	Non-life insurance technical reserves		0				0			0

TRANSACTIONS OF LIFE INSURANCE

• 16.68This section describes how records for life insurance differ from non-life insurance records. For a life insurance policy the benefits from the policy are treated as changes in wealth, recorded in the financial account. For a policy qualifying as social insurance, the benefits in the form of pensions are recorded as income in the secondary distribution of income account. The reason for the different treatment is that a policy other than social insurance is entered into entirely on the initiative of the policyholder. Policies that qualify as social insurance reflect the intervention of a third party, usually the government or the employer, to encourage or oblige the policyholder to make reserve for income in retirement. Social insurance is described in Chapter 17.

• 16.69The holder of a life insurance policy is an individual classified within the households sector (S.143 or S.144). If a company takes out an insurance policy on the life of an employee, this is term insurance and not life insurance. Life insurance transactions therefore take place only between insurers (classified within the insurance corporations subsector — S.128) and resident households as individuals (S.143 and S.144), unless exported to non-resident households (classified within the rest of the world sector — S.2). The output value of life insurance is matched by the value of the households' final consumption expenditures and exports in services, following the same approach as for non-life insurance. The investment income attributed to insurance policyholders is treated as premium supplements. However, premiums and claims are not shown separately in the case of life insurance and are not treated as current transfers. Rather they constitute components of a net transaction recorded in the financial account, the financial asset involved being life insurance and annuities entitlements.

• 16.70Four pairs of transactions are recorded in the accounts; two pairs relate to production and consumption of the insurance service, one pair shows the attribution of investment income to the policy holders and one pair shows the change in life insurance and annuities entitlements:

• (a) the output (P.1) of the life insurance is recorded in the production account for the insurers;

• (b) the value of the services consumed is recorded as final consumption expenditure (P.3) by households in the use of disposable income account or as payable by the rest of the world, treated as exports of services (P.62) to non-resident households. Payments by households to non-resident insurers are imports of services (P.72);

• (c) investment income earned from investing life insurance technical reserves attributed to policyholders (D.441) is recorded in the allocation of primary income account. Bonuses declared in connection with life policies are treated as being distributed to policyholders even if they exceed the investment income earned by the institution declaring the bonus. The investment income is recorded as payable by insurers and receivable by resident households or non-resident households in the rest of the world. The investment income shall be allocated among policyholders in proportion to their life technical reserves, or, if that information is not available, in proportion to the premiums written;

• (d) the financial balance sheet holds entries for life insurance technical reserves and annuity entitlements (AF.62). Such reserves are recorded as liabilities of insurers and assets of households and the rest of the world. These amounts reflect the savings character of life insurance policies. This includes the prepayment of premiums and the payment of benefits. A breakdown of this category is not required, although both components are needed in the calculation of premiums earned and benefits due.

• 16.71Life insurance technical reserves and annuities entitlements reflect policies that yield a lump sum at a given date. The lump sum may be used to purchase an annuity that itself converts a lump sum into a stream of payments. The conditional entitlements of the individual policyholders — the amount receivable at or after maturity as a lump sum payment or an annuity — do not aggregate to the value of the insurer's obligations. The difference is derived from the conditionality and the present value calculation. The amount to be reported under life insurance and annuity entitlements' is defined according to the insurers' accounting principles.

• 16.72An example of such flows is shown in Table 16.2.

Table 16.2 —   Life insurance

Image omitted; see official source

Text of image

Uses or assets

Resources or liabilities

S.1

S.15

S.14

S.13

S.12

S.11

S.11

S.12

S.13

S.14

S.15

S.1

Corresponding entries of the

Corresponding entries of the

Total

Goods and services account

Rest of the word account

Total economy

NPISHs

House-holds

General government

Financial corporations

Non- financial corporations

Transactions and balancing items

Non- financial corporations

Financial corporations

General government

House-holds

NPISHs

Total economy

Rest of the word account

Goods and services account

Total

External account

0

0

P.62

Exports in services

0

0

0

0

P.72

Imports in services

0

0

Production account

4

4

P.1

Out put

4

4

4

Distribution of primary income account

7

7

7

D.441

Property income attributable to insurance policy holders

7

7

0

7

Use of disposable income account

4

0

4

4

P.3

Final consumption expenditure

4

4

Financial balance sheet (opening)

221

0

221

221

AF.62

Life insurance technical reserves

221

221

221

Financial balance sheet (closeing)

243

0

243

243

AF.62

Life insurance technical reserves

243

243

243

Financial transation

22

0

22

22

F.62

Life insurance technical reserves

22

22

22

Revaluation account

0

0

0

0

AF.62

Life insurance technical reserves

0

0

0

TRANSACTIONS ASSOCIATED WITH REINSURANCE

• 16.73Accounts of reinsurers are largely the same as the accounts of direct insurers. The only difference is that direct insurance transactions with policyholders who are not themselves providers of insurance are replaced by insurance transactions between reinsurers and direct insurers.

• 16.74Insurance transactions are recorded gross of reinsurance. Premiums are first payable to the direct insurer who may then pay a proportion of the premium to the reinsurer (cession), who might then pay a smaller amount to another reinsurer, and so on (retrocession). Analogously, the same applies to claims or benefits. The gross treatment is in line with the original policyholder's point of view. This policyholder normally is not aware of any amount ceded by the direct insurer to a reinsurer and, should the reinsurer go bankrupt, the direct insurer remains liable to pay the full amount of the claims on ceded risks.

• 16.75The output of direct insurance is calculated gross of reinsurance. The alternative calculation net of reinsurance would be to show part of the direct policyholders' premiums being paid to the direct insurer and part to the reinsurer, but this way of recording, called 'net recording', is not allowed.

• Chart 1 below illustrates this process.

Chart 1 —   Flows between policyholders, direct and indirect insurers

Image omitted; see official source

Text of image

1a. Gross premium

2a. Gross claim

3a. Gross property income

Policyholder

Direct insurer

1b. Reins. premium

2b. Reins. claim

3b. Property income

Property income

Reinsurer

• 16.76Chart 1 summarises the following flows:

• 1 the policyholder makes the payment of the premium gross of reinsurance to the direct insurer (1a), of which the reinsurance part of the gross premium is ceded to the reinsurer (1b);

• 2 similarly, the payment of claim is recorded, but in the opposite direction. The claim is paid by the reinsurer to the direct insurer (2b). The direct insurer adds to this amount its own claim paid further to the policyholder (2a);

• 3 both the direct insurer and the reinsurer earned property income from investing their technical reserves. Property income is transferred by the reinsurer to the direct insurer (3b) who then adds this amount to its own property income earned and further distributes to the policyholder (3a).

• 16.77All gross flows between the policyholder and the direct insurer include the corresponding amounts of the flows between the direct insurer and the reinsurer; for this reason these arrows are shown as being thicker in the chart.

• 16.78As with direct insurance, for example following a catastrophic disaster, part of reinsurance claims are recorded as capital transfers rather than as current transfers.

• 16.79The whole of the output of the reinsurer is intermediate consumption of the direct insurer holding the reinsurance policy. As noted above, many reinsurance policies are between insurers resident in different economies. Thus, the value of the output in such cases represents imports by the insurer taking out the reinsurance policy and exports by the reinsurer.

• 16.80The recording of flows associated with reinsurance resembles the recording for non-life insurance except that the policyholder of a reinsurance policy is always another insurer.

• 16.81The production and consumption transactions are as follows:

• (a) the output (P.1) is recorded in the production account of reinsurers. Reinsurance services are often provided by non-resident reinsurers and in such cases are recorded as imports of services (P.72);

• (b) the service of the reinsurer can only be consumed by a direct insurer or another reinsurer. If the policyholder is resident, the use of the reinsurance service is recorded as intermediate consumption (P.2) of the policyholder unit. Where the policyholder is non-resident, the use is recorded as exports of services (P.62).

• 16.82The distributive transactions cover investment income attributed to policyholders in respect of reinsurance, net reinsurance premiums and reinsurance claims:

• (a) investment income (D.441) earned by reinsurers from investing reinsurance technical reserves is payable to policyholders who can be direct insurers or reinsurers. Both reinsurance and direct insurers may be resident or non-resident;

• (b) net non-life reinsurance premiums (D.712) are payable by policyholders and receivable by reinsurers. Either of the units due to make the payment or to receive it may be non-resident;

• (c) non-life reinsurance claims (D.722) are payable by reinsurers and receivable by policyholders, either resident or non-resident. Both net premiums and claims are recorded in the secondary distribution of income account;

• (d) the financial balance sheet holds records reflecting the reinsurance technical reserves (under AF.61, 'non-life insurance technical reserves'). Such reserves are recorded as liabilities of reinsurers and assets of policyholders. Such policyholders can be direct insurers or reinsurers.

• 16.83Commissions payable by reinsurers to the insurer as the reinsurance policyholder are treated as reductions in the premiums payable to the reinsurers. Profit sharing payable by the reinsurer to the direct insurer is recorded as a current transfer. Although they are recorded differently, both commissions payable and profit sharing reduce the output of the reinsurer.

• 16.84If direct insurance claims are treated as capital and not current transfers, the reinsurance claims for the same event are also treated as other capital transfers (D.99).

TRANSACTIONS ASSOCIATED WITH INSURANCE AUXILIARIES

• 16.85The output of auxiliary insurance services is valued on the basis of the fees or commissions charged. In the case of non-profit institutions operating as business associations for insurance enterprises and pension funds, their output is valued by the amounts of subscriptions paid by the members of the associations. This output is used as intermediate consumption by the members of the associations.

ANNUITIES

• 16.86The simplest case of a life insurance policy is one where a stream of payments is made by the policyholder to the insurer over time in return for a single payment received as a claim at some point in the future. With the simplest form of annuity, the equivalent to the policyholder, called the annuitant, pays a single lump sum to the insurer and in return receives a stream of payments either for a nominated period or for the rest of the annuitant's life, or for the rest of the life of both the annuitant and a nominated other person.

• 16.87Annuities are organised by insurers and are a means of risk management. The annuitant avoids risk by agreeing to accept a known payment stream, known either in absolute terms or subject to a formula, such as being index-linked, in return for a single payment. The insurer takes the risk of making more from investing the single payment than is paid to the annuitant as a payment stream. Life expectancy is taken into account in determining the stream of payments.

• 16.88When an annuity is initiated, there is a transfer of funds from the household to the insurer. In many cases, however, this may simply be a 'rollover' from a lump sum payable by that or another insurer from the maturing of a normal life insurance policy immediately into an annuity. In such a case there is no need to record the payment of the lump sum and the acquisition of the annuity; there will simply be a change from life insurance reserves to annuity reserves in the insurer and pension fund subsector. If an annuity is purchased independently of the maturing of a life insurance policy, this is recorded as a pair of financial transactions between the household and the insurer. The household makes a payment to the insurer and receives in return an asset arising from the terms of the annuity. The insurer receives a financial asset from the household and incurs a liability towards it.

• 16.89Annuities are terminated by death, at which point any remaining reserves for that annuitant are transferred to the insurer. However, assuming the insurer has predicted life expectancy accurately, for the group of annuitants as a whole, the average funds remaining at death will be zero. If life expectancies change, revisions to the reserves must be made. For annuities in operation, an extension of life expectancies will reduce the amount available to the insurer as a service charge, possibly making this negative. In such a case, the insurer will have to draw on its own funds and hope to build them up again in future by associating higher service charges with new annuities.

RECORDING NON-LIFE INSURANCE CLAIMS

Treatment of adjusted claims

• 16.90The time of recording claims incurred is generally when the related event occurs. This principle is applied even when, in the case of disputed claims, the settlement may take place years after the event concerned. An exception is made in cases where the possibility of making a claim is recognised only long after the event has happened. For example, an important series of claims were recognised only when exposure to asbestos was established as a cause of serious illness and was judged to give rise to claims under an insurance policy valid at the time of the exposure. In such cases the claim is recorded at the time that the insurance company accepts the liability. This may not be the same time as when the size of the claim is agreed on or when the claim is paid.

• 16.91Given that the formula for output uses adjusted claims and not actual claims, only when the actual claims happen to be the same values as expected claims will net premiums and claims be equal in a given period. They should however be approximately equal over a period of years excluding a year in which a disaster is recorded.

Treatment of catastrophic losses

• 16.92Claims are recorded as current transfers payable by the insurer to the policyholder. There is one case where claims are recorded as other capital transfers (D.99) rather than current transfers and that is in the wake of a major catastrophe. The criteria for when the effects of a disaster should be treated like this must be determined according to national circumstances, but these may involve the number of policyholders affected and the amount of the damage done. The rationale for recording the claims as capital transfers in this case comes from the fact that many of the claims will relate to destruction or serious damage to assets such as dwellings, buildings and structures.

• 16.93Following a catastrophe, the total value of the claims in excess of the premiums is recorded as a capital transfer from the insurer to the policyholder. Information on the level of claims to be met under insurance policies is obtained from the insurance industry. If the insurance industry cannot provide this information, one approach to estimating the level of the catastrophe-related claims is to take the difference between the adjusted claims and the actual claims in the period of the catastrophe.

CHAPTER 17

SOCIAL INSURANCE INCLUDING PENSIONS

INTRODUCTION

• 17.01 Definition: social insurance schemes are schemes in which participants are obliged, or encouraged, by a third party to take out insurance against certain social risks or circumstances that may adversely affect their welfare or that of their dependants. In such schemes, social contributions are paid by employees or others, or by employers on behalf of their employees, in order to secure entitlement to social insurance benefits, in the current or subsequent periods, for the employees or other contributors, their dependents or survivors. Contributions to social insurance schemes can also be paid by, or on behalf of, self-employed or non-employed persons.

• 17.02There are two types of social insurance schemes:

• (a) the first consists of social security schemes covering the entire community, or large sections of the community, that are imposed, controlled and financed by government units. Pensions payable under such schemes may or may not be related to levels of salary of the beneficiary or history of employment. Non-pension benefits are less frequently linked to salary levels;

• (b) the second type consists of other employment related schemes. Such schemes derive from an employer-employee relationship in the provision of pension, and possibly other, entitlements that are part of the conditions of employment and where responsibility for the provision of benefits does not devolve to general government under social security provisions.

• 17.03The scope of social insurance schemes varies from country to country, and from scheme to scheme within the same country. Examples of such schemes are the following:

• (a) general government obliges all employees to participate in a social security scheme;

• (b) employers make it a condition of employment that employees participate in an insurance scheme specified by the employer;

• (c) an employer encourages employees to join a scheme by making contributions on behalf of the employee;

• (d) a trade union arranges advantageous insurance cover available only to the members of the trade union; or

• (e) the schemes other than social security may be arranged with an insurance corporation as a group policy or series of policies, or they may be managed by an insurance corporation in return for a fee. Alternatively, the schemes may be managed by an employer directly on his own behalf or by employers on behalf of their employees and their dependants or by others on behalf of a specified group.

Table 17.1 —  Social insurance schemes

Type of insurance	Characteristics	Form of organisation	Sector/subsector
Social security	The participants are obliged by general government to insure against certain social risks	Organised by general government via social security funds	Social security funds (S.1314)
Employment-related social insurance schemes other than social security	Employers can make it a condition of employment that employees insure against certain social risks	Organised by employers on behalf of their employees and their dependents or by others on behalf of a specified group	Sector or subsector of employer, insurance corporations and pension funds or non-profit institutions serving households

Social insurance schemes, social assistance and individual insurance policies

• 17.04Social assistance is not part of social insurance. Social assistance benefits are payable independently of participation in a social insurance scheme, i.e. without qualifying contributions having been made to a social insurance scheme.

• 17.05Social assistance is distinguished from social security, by the eligibility to receive social assistance benefits from general government, and is not dependent on having elected to participate as demonstrated by the payment of contributions. Usually all members of resident households are entitled to apply for social assistance but the conditions under which it is granted are often restrictive. Frequently there is an assessment of available income including social insurance benefits, in relation to the perceived needs of a household. Only those households falling below a given threshold may be entitled to this type of social assistance.

• 17.06Individual insurance policies qualify as social insurance schemes if they cover social risks and needs such as sickness and old age. In order for an individual policy to be treated as part of a social insurance scheme, the eventualities or circumstances against which the participants are insured shall correspond to the risks or needs listed in paragraph 4.84; in addition, one or more of the following conditions shall be satisfied:

• (a) participation in the scheme is obligatory either by law or under the terms and conditions of employment of an employee, or group of employees;

• (b) the scheme is collective and is operated for the benefit of a designated group of workers, whether employees, self-employed or non-employed, participation being restricted to members of that group;

• (c) an employer makes a contribution (actual or imputed) to the scheme on behalf of an employee, whether or not the employee also makes a contribution.

• 17.07Insurance claims on policies taken out with the sole purpose of obtaining a discount, even if those policies follow from a collective agreement, are excluded from social insurance. Such individual insurance policies are recorded as life and non-life insurance. Insurance claims based on policies taken out solely on the own initiative of the insured, independently of his employer or government, are also excluded from social insurance.

Social benefits

• 17.08Social benefits become payable when certain events occur, or certain conditions exist that may adversely affect the welfare of the households concerned either by imposing additional demands on their resources or reducing their incomes. Social benefits are provided in cash or in kind. There are a number of circumstances in which social benefits are payable:

• (a) the beneficiaries, or their dependants, require medical, dental or other treatment, or hospital, convalescent or long-term care, as a result of sickness, injuries, maternity, chronic invalidity, old age, etc. The social benefits may be provided in kind in the form of treatments or care provided free or at prices that are not economically significant, or by reimbursing expenditures made by households. Social benefits in cash may also be payable to beneficiaries needing health care;

• (b) the beneficiaries have to support dependants of various kinds: spouses, children, elderly relatives, invalids, etc. The social benefits are usually paid in cash in the form of regular dependants' or family allowances;

• (c) the beneficiaries suffer a reduction in income as a result of not being able to work full-time or work at all. The social benefits are usually paid regularly, in cash, and for the duration of the condition. In some instances a lump sum may be provided additionally or instead of the regular payment. Examples of why people may be prevented from working are as follows:
• (1) voluntary or compulsory retirement;
• (2) involuntary unemployment, including temporary lay-offs and short-time working;
• (3) sickness, accidental injury, the birth of a child, etc., that prevents a person from working, or working full time;

• (d) the beneficiaries receive payments to compensate for suffering a reduction in income because of the death of the main income earner;

• (e) the beneficiaries are provided with housing either for free or at prices that are not economically significant or by reimbursing expenditure made by households. Such items are social benefits in kind;

• (f) the beneficiaries are provided with allowances to cover education expenses incurred on behalf of themselves or their dependants. Education services may be provided as social benefits in kind.

Social benefits provided by general government

• 17.09General government provides social benefits as payments under social security, social assistance or social transfers in kind.

• 17.10Social security refers to social insurance schemes operated by general government.

• 17.11The definition of social benefits includes the provision of health and education services. Typically general government makes such services available to all members of the community without requiring participation in a scheme or qualifying requirements. The services are treated as social transfers in kind and not as part of social security or social assistance. In addition to health and education services provided by general government, such services may also be provided to individuals by non-profit institutions serving households. Such services are also treated as social transfers in kind and not as part of social insurance schemes.

Social benefits provided by other institutional units

• 17.12Social benefits can be provided by employers to their employees and their dependents or provided by other units such as trade unions. All social benefits provided by units other than general government are made under a social insurance scheme.

Pensions and other forms of benefit

• 17.13Social insurance benefits and the corresponding contributions are divided between those relating to pensions and those relating to all other forms of benefit. The most important pension benefit covered by social insurance schemes is income in retirement, but there are other examples. For instance, pensions may be payable to widows and widowers or to people who suffer an industrial injury and are no longer able to work. The main income earner is no longer able, through death or incapacity, to provide an income, and so payments are made and recorded as pensions.

• 17.14All other benefits are grouped together as non-pension benefits. The distinction between pension and non-pension benefits is important because liabilities are recorded for pensions whether there are actually assets set aside to meet the entitlements or not, but reserves are recorded for non-pension benefits only when the reserves actually exist.

SOCIAL INSURANCE BENEFITS OTHER THAN PENSIONS

• 17.15 Definition: other social insurance benefits, or non-pension benefits, are benefits which beneficiaries receive, directly or indirectly, depending on specific events and usually under predetermined legal or contractual terms.

• Excluding income in retirement, a number of other contingencies may be covered such as health insurance, unemployment insurance and long-term care insurance benefits.

• 17.16Other social insurance benefits are provided to beneficiaries under social security and under employment-related schemes other than social security.

Social security schemes other than pension schemes

• 17.17 Definition: social security schemes other than pension schemes are contractual insurance schemes where the beneficiaries as participants of a social insurance scheme are obliged by general government to insure against risks other than old age and other age-related risks. Social security benefits other than pension benefits, known as non-pension benefits, are provided to beneficiaries by general government.