240 Government Finance Statistics Manual 2014
in all types of insurance activities.^18 When operat-
ing standardized guarantee schemes, such as stu-
dent loan guarantees, deposit guarantees, and export
credit guarantees, general government units record
transactions in liabilities for provision for calls under
standardized guarantee schemes. Th ese transactions in
liabilities comprise:- Prepayments of net fees: fees prepaid in the
reporting period less previously prepaid fees
earned for the reporting period - Provisions for outstanding calls: expected calls
less any expected asset recoveries on the stan-
dardized guarantees provided in the recording
period less any calls settled in the recording pe-
riod (see paragraphs A4.78–A4.80).
Nonlife insurance technical reserves [GFS] (32061, 32161, 32261, 33061, 33161, 33261)
9.58 In general, nonlife insurance premiums are
paid in advance of the period covered by the policy.
On an accrual basis, all such prepaid premiums are
transactions that increase the insurance unit’s liabil-
ity and the policyholder’s asset for insurance techni-
cal reserves. As the period covered by the premium
progresses, the insurance unit continuously earns the
premium, which requires a transaction to decrease its
liability and the policyholder’s asset for nonlife insur-
ance technical reserves.
9.59 When events occur giving rise to a valid
claim, a transaction is recorded that increases reserves
against outstanding claims as a liability of the insur-
ance unit and an asset of the benefi ciaries. If payment
of the claim is delayed for a substantial length of time
or consists of periodic payments over several report-
ing periods, the value of the transaction corresponds
to the present value of the expected payments.
9.60 Th e change in unearned premiums and re-
serves against outstanding claims is shown as a trans-
action in liabilities of the insurer and a transaction in
assets of the policyholders. Th e relevant transactions
in revenue and expense are discussed in paragraphs
5.149–5.151 and 6.125.(^18) It is assumed that general government units do not operate life
insurance schemes and do not purchase life insurance policies.
Th e treatment of insurance technical reserves created by life in-
surance activities of public corporations is similar to autonomous
pension funds, but is not addressed separately here. Also see the
2008 SNA, Chapter 17, and the BPM6, Appendix 6c.
9.61 On a cash basis, premiums received and
claims paid are shown as a transaction in revenue and
expense of the insurer and the policyholders when
payments are made.
Life insurance and annuities entitlements (32062, 32162, 32262, 33062, 33162, 33262)
9.62 As noted in paragraph 7.179, it is unlikely for
general government units to incur liabilities or hold
assets with respect to life insurance and annuities, un-
less they provide such schemes to their employees.
Changes in life insurance and annuities entitlements
are transactions in liabilities for the insurer and trans-
actions in fi nancial assets for the policyholders. In the
case of annuities, the transactions constitute a stream
of ongoing payments, rather than a lump sum that re-
duces the liability. Th e treatment of life insurance and
annuities is elaborated in paragraph A4.69.Pension entitlements [GFS] (32063, 32163, 32263, 33063, 33163, 33263)
9.63 If a public sector unit operates a pension
scheme, then it will have transactions in liabilities for
pension entitlements.
9.64 For a defi ned-benefi t scheme, actual and im-
puted social contributions receivable from employees,
employers, or other institutional units on behalf of in-
dividuals or households with claims on the public sec-
tor unit for future pension benefi ts will increase the
unit’s liability for pension entitlements. Th e increase
in the existing liability (because the future payments
are discounted over fewer periods) is recorded as a
transaction in pension entitlements with the corre-
sponding entry being an expense in the form of im-
puted social contributions, as explained in paragraph
6.117. Payments to retired persons or their depen-
dents and survivors in the form of periodic payments
or lump sums reduce the liability, with a decrease in
currency and deposits as the counterpart entry. On a
cash basis, the benefi ts paid should be recorded as an
expense in the form of employment-related social ben-
efi ts [GFS] (273).^19(^19) Th e cash treatment diff ers from the accrual treatment because
there are no imputations for contributions and accumulated
liabilities in a cash-based system. Furthermore, in a cash system,
the benefi ts paid cannot be regarded as compensation of em-
ployees because they are paid to retired employees, not current
employees—there is no exchange of labor involved at the time.