Page 175 - IC46 addendum

Indian Accounting Standards

IG Example 2: Embedded derivatives

Type of embedded Treatment if Treatment if embedded
derivative embedded in a host in a host investment
insurance contract contract

2.1 Death benefit linked to The equity-index feature Not applicable. The entire

equity prices or equity is an insurance contract contract is an insurance

index, payable only on (unless the life- contract (unless the life-

death or annuitisation contingent payments contingent payments are

and not on surrender or are insignificant), insignificant).

maturity. because the

policyholder benefits

from it only when the

insured event occurs.

Fair value measurement

is not required (but not

prohibited).

2.2 Death benefit that is the Excess of guaranteed Not applicable. The entire

greater of: minimum over unit value contract is an insurance

(a) unit value of an is a death benefit contract (unless the life-

investment fund (similar to the payout on contingent payments are

(equal to the amount a dual trigger contract, insignificant).

payable on see IG Example 2.19).

surrender or This meets the

maturity); and definition of an

insurance contract

(b) guaranteed (unless the life-

minimum. contingent payments

are insignificant) and

fair value measurement

is not required (but not

prohibited).

2.3 Option to take a life- The embedded option is Not applicable. The entire
contingent annuity an insurance contract contract is an insurance
at guaranteed rate (unless the life- contract (unless the life-
(combined guarantee of contingent payments contingent payments are
interest rates and are insignificant). Fair insignificant).
mortality charges). value measurement is
not required (but not
prohibited).

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