Guarantee fund established by contract
A guarantee fund is established by contract. The contract requires all participants to pay contributions to the fund so that it can meet obligations incurred by participants (and, perhaps, others). Participants would typically be from a single industry, e.g. insurance, banking or travel.
The contract that establishes the guarantee fund is an insurance contract. [IFRS 4.IG2 E1.13].
This example contrasts with Example 53.15 below where a guarantee fund has been established by law and not by contract.
Example 53.10: Insurance contract issued to employees related to a defined contribution pension plan
An insurance contract is issued by an insurer to its employees as a result of a defined contribution pension plan. The contractual benefits for employee service in the current and prior periods are not contingent on future service. The insurer also issues similar contracts on the same terms to third parties.
This is an insurance contract. However, if the insurer pays part or all of its employee’s premiums, the payment by an insurer is an employee benefit within the scope of IAS 19 and is not accounted for under IFRS 4 because the insurer is the employer and would be paying its own insurance premiums. [IFRS 4.IG2 E1.22].
Defined benefit pension liabilities are outside the scope of IFRS 4 as discussed at 2.2.3.B above.