Disclosure about the nature and extent of insurance risks
An entity needs to disclose information that enables financial statement users to evaluate the nature, amount, timing and uncertainty of future cash flows that arise from contracts within the scope of IFRS 17 [IFRS 17 93 and IFRS 17 121].
Disclosures focus on the insurance and financial risks that arise from insurance contracts and how they have been managed. Financial risks typically include but are not limited to, credit risk, liquidity risk and market risk [IFRS 17 122]. Many similar disclosures were included in IFRS 4, often phrased to the effect that an insurer should make disclosures about insurance contracts, assuming that these were within the scope of IFRS 7. The equivalent disclosures now required by IFRS 17 are more specific to the circumstances of the measurement of insurance contracts in the standard, with no cross-reference to IFRS 7.
For each type of risk arising from contracts within the scope of IFRS 17, an entity must disclose [IFRS 17 124]:
- Exposures to risks and how they arise
- The entity’s objectives, policies, and processes for managing the risks and methods used to measure them
- Any changes in the above from the previous period
- Summary quantitative information about its exposure to that risk at the end of the reporting period, with disclosure based on information provided internally to the entity’s key management personnel
- Concentration of risks
- Sensitivity analyses for insurance and finance risks
- Claims development
- Credit risk — including maximum exposures and credit quality
- Liquidity risk
- The effect of regulatory frameworks in which the entity operates, e.g., minimum capital requirements or required interest-rate guarantees