Measurement of insurance contracts

There are three measurement approaches under IFRS 17 for different types of insurance contract:

General model should be applied to all insurance contracts, unless they have direct participation features or the contract is eligible for, and the entity elects to apply, the premium allocation approach.

Premium allocation approach is an optional simplification for measurement of liability for remaining coverage for insurance contracts with short-term coverage.

Variable fee approach should be applied to insurance contracts with direct participation features. This approach deals with participating business where payments to policyholders are contractually linked and substantially vary with the underlying items. This approach cannot be used for the measurement of reinsurance contracts.

In summary:

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