Identification of general insurance contracts for accounting purposes (RMG 112)


This guide applies to all officials, particularly chief financial officers and finance teams, in Commonwealth entities that enter into contracts that transfer insurance risk to another party.

Key points

This guide:

This RMG applies until 1 July 2026 (for the life of the AASB 1023). Then the RMG will be updated to reflect the application of AASB 17 Insurance Contracts.
Related resources include the PGPA Act and Rule, Australian Accounting Standards (AAS). Appendix A - Definitions and related RMGs are located under Tools and Templates in the right hand menu.


Commonwealth entities are required to prepare their annual financial statements in accordance with the AAS and the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR).

AASB 1023 details the accounting requirements for general insurance contracts. While there are various types of insurance contracts, for AASB 1023 purposes, a general insurance contract is an insurance contract that is not a life insurance contract.

This guide assists entities in identifying whether a general insurance contract exists for AASB 1023 accounting purposes.

All Commonwealth entities within the General Government Sector (GGS) are required to participate in Comcover for general insurance risks, unless they have been exempted by the Minister for Finance.

An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future insured event, adversely affects the policyholder.

For an insurance contract to exist, there must be:

Governing your entity:

Under the definitions provided at paragraph 19.1 of AASB 1023, a general insurance contract is an insurance contract that is not a life insurance contract. Any contract that transfers insurance risk from one party to another and is not a life insurance contract could be a general insurance contract. Under AASB 1023, any entity that issues an insurance contract is an ‘insurer’, whether or not that entity is regarded as an insurer for legal, regulatory or supervisory purposes.

Example 1: Contracts that are general insurance contracts

Contracts that are general insurance contracts, where the transfer of insurance risk is significant, include:

  • insurance against theft or damage to property
  • insurance against product or professional liability or legal expenses
  • medical cover
  • surety bonds, fidelity bonds, performance bonds and bid bonds
  • travel assistance (i.e. compensation for losses suffered while travelling).

Figure 1 shows the elements that must all be present for an agreement to be a general insurance contract. References to Appendix A of AASB 1023 are included, however, these do not replicate the appendix. Other paragraphs of AASB 1023 may also be relevant to users of this guide in determining whether a general insurance contract exists.

Figure 1: An insurance contract only exists if all the following elements are present

Governing your entity:

Entities must advise Comcover as soon as practicable if any risk that is covered by Comcover is also covered under a separate insurance policy.

Assessing the significance of risks and benefits

In determining whether a Genera insurance contract exists, entities will need to apply professional judgement in assessing whether the:

  • insurance risk being transferred from the policyholder to the insurer is significant
  • policyholder will derive significant additional benefits from the insurer if the insured event occurs.

The significance of the insurance risk needs be assessed on a case-by-case basis, in accordance with the entity’s risk management policy.

Example 2: Significance of an insurance risk

A Commonwealth company (that is not classified to the GGS) enters into an insurance contract to cover the risk associated with flood or earthquake damage. While the likelihood of the insured event occurring may be low, the consequences of a flood or earthquake could be high.

Example 3: Significance of additional benefit

If the benefit payable is similar to the interest the policyholder would receive if they invested the insurance premium, then the additional benefit would not be significant.

Below are examples of contracts that are not general insurance contracts. Also see the examples at Appendix A, paragraph 18 of AASB 1023.

Example 4: Contracts that are not general insurance contracts

Examples of contracts that are not general insurance contracts include:

  • contracts that pass all significant insurance risk back to the policyholder through non-cancellable and enforceable mechanisms (these are normally non-insurance financial instruments or service contracts)
  • self-insurance
  • a credit-related guarantee that requires payments even if the holder has not incurred a loss on the failure of the debtor to make payments when due
  • a contract that requires a payment based on a climatic, geological or other physical variable that is not specific to the party to the contract
  • life insurance contracts (these are outside the scope of AASB 1023).

Appendix A, paragraph 18(b) of AASB 1023 notes that self-insurance is not a general insurance contract.
Self-insurance occurs where a risk that could be covered by an insurance contract is retained. Under self-insurance arrangements, there is no insurance contract as there is no agreement to the transfer of an insurance risk to another party.

Other contracts that do not meet the General Insurance Contract definition

Where a contract does not satisfy the definition of a general insurance contract, the entity should consider whether the following AAS apply:

Where a general insurance contract exists, entities are to:

Governing your entity:

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