IFRS 17 Insurance Contracts

IFRS 17 Insurance Contracts

IFRS 17 Insurance contracts Contents

The IASB issued IFRS 17, a comprehensive new accounting standard for insurance contracts in May 2017. IFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2021, with early application permitted.

The IFRS 17 model combines a current balance sheet measurement of insurance contracts with recognition of profit over the period that services are provided.…

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IFRS 17 Insurance Contracts

Main FS Statements Insurance contracts

These examples of the main Financial Statements statements demonstrate the requirements in respect of presentation and disclosure according to IFRS 17 Insurance contracts. They also include the requirements (introduced or amended) in respect of presentation and disclosure according to IFRS 9 Financial instruments and IFRS 7 Financial instruments: Disclosures.

It is prepared for illustrative purposes only and should be

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IFRS 17 Insurance Contracts

Sensitivity analysis to market risk

Companies are required to report both qualitatively and quantitatively on their risk management strategies and the internal metrics they use for the calculation and management of risk arising from financial instruments.

IFRS 7 breaks down the risk arising from financial instruments into three broad categories: market risk, credit risk and liquidity risk.

Market risk is the risk

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IFRS 17 Insurance Contracts
IFRS 7 Financial instruments: Disclosure

Management of credit risk for financial instruments

Financial institutions (banks, insurance companies, investment entities) should have a management process in place to identify, measure, monitor and control credit risk as well as to determine that they hold adequate capital against these risks and that they are adequately compensated for risks incurred.

The sound practices should specifically address the following areas:

  1. establishing an appropriate credit risk
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IFRS 13 Fair value measurement
IFRS 17 Insurance Contracts

Fair value disclosures

The below illustrative disclosures are limited to financial assets and liabilities measured in accordance with IFRS 9. In many cases, insurers may have other balances that require fair value measurement disclosures in accordance with IFRS 13.

Fair value hierarchy



IFRS 13 73

The insurer categorises a financial asset or a financial liability measured at fair value at

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IFRS 17 Insurance Contracts
IFRS 9 Financial instruments

Accounting policies for financial instruments

Summary of significant accounting policies for financial instruments

1 Financial assets and liabilities

1.1 Summary of measurement categories

The insurer classifies its financial assets into the following categories:

Business model and cash flow characteristics

Type of financial instruments


Hold to collect business model and solely payments of principal and interest

Cash and cash equivalents

Amortised cost (AC)

Hold to

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IFRS 17 Insurance Contracts

Key differences between GM and VFA Insurance

The Variable Fee Approach (‘VFA’) is a modification of the General Model. The General Model is applied to insurance contracts without participation features or to insurance contracts with participation features that fail the Variable fee scope test. Thus, the VFA is applied to insurance contracts with direct participation features that contain the following conditions at initial recognition

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IFRS 17 Insurance Contracts

Insurances Classification and Measurement


(first part from https://en.wikipedia.org/wiki/Insurance)

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is

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IFRS 17 Insurance Contracts

Disclosure requirements IFRS 4 and IFRS 17

Explanation of recognized amounts from IFRS 4 to IFRS 17

1 Introduction

[IFRS 17 (98), IFRS 17 (93)-(96)]

IFRS 4 requires an entity to disclose information that identifies and explains the amounts in its financial statements arising from insurance contracts. In order to comply with this objective, IFRS 4 outlines what should be disclosed regarding reconciliations,

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IFRS 17 Insurance Contracts

Disclosure on Transition IFRS 17

On transition, insurance contracts will be measured differently from the measurement going forward, unless the full retrospective approach is applied. This will impact the measurement of insurance contracts in the statement of financial position and in the income statement after transition until the insurance contracts in force on transition are derecognised. The following disclosures are required for all periods where

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