Industry
↳ Gross premium income is standard for insurance entities.
Benchmark
Performance Materiality
Reduces the probability that uncorrected misstatements exceed overall materiality.
Clearly Trivial
Misstatements below this need not be accumulated unless qualitatively material.
ISA 320 Decision Tree
One-page visual guide for benchmark selection — plus one practical audit insight per week.
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Benchmark Guidance
Insurance companies present unique challenges for materiality determination. Premium income drives the business, but the most significant balance sheet items — insurance contract liabilities and reserves — involve extensive actuarial estimation.
Choosing the Right Benchmark
Gross written premiums at 0.5–1% is the most common benchmark for insurance entities. Total assets at 0.5–1% is an alternative, particularly where investment portfolio management is as significant as underwriting.
Key Audit Considerations
Insurance contract liabilities under IFRS 17 involve significant actuarial estimates — fulfilment cash flows, risk adjustment, and the contractual service margin.
Claims reserves (both reported and IBNR) are the highest-risk area and typically warrant input from an auditor's actuarial expert.
Investment portfolio valuation may warrant specific materiality considerations.
Solvency II regulatory capital requirements create additional user needs beyond IFRS reporting.
ISA 320.10 — Determine materiality for the financial statements as a whole when establishing the overall audit strategy.
ISA 320.11 — Determine performance materiality for assessing risks and determining further audit procedures.
ISA 320.A4 — Common benchmarks: PBT, revenue, gross profit, total expenses, total equity, or net asset value.