Other life insurance

30. 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 sub-sector. 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).

31. Two further transactions are recorded for other life insurance. In the allocation of primary income account, property income attributed to policy holders (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 provisions 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.

32. 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 policy holders (= 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. 1 is class 66.01 'Life insurance'.

33. 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 policy holders 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, e.g. 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.