IFRS 17 at a glance – Complete best read

IFRS 17 at a glance

IFRS 17 introduces the new measurement model for insurance contracts and will be effective in 2023.


Similar to IFRS 4 Insurance Contracts with some new requirements, including as to the border with financial instruments accounting.

IFRS 4 Insurance Contracts applies, with limited exceptions, to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds. In light of the IASB’s comprehensive project on insurance contracts, the standard provides a temporary exemption from the requirements of some other IFRSs, including the requirement to consider IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors when selecting accounting policies for insurance contracts.

IFRS 4 applies to annual periods beginning on or after 1 January 2005. IFRS 4 will be replaced by IFRS 17 as of 1 January 2023.

The general measurement model

IFRS 17 at a glance
Note: Depending on the facts and circumstances, the size and direction of the components could vary.

See also The general-model-in-insurance-contracts

Initial recognition

On initial recognition, the liability of a group of insurance contracts is made up of the following components.

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Introduction IFRS 17 Insurance contracts

Introduction IFRS 17 Insurance contracts – More than 20 years in development, IFRS 17 represents a complete overhaul of accounting for insurance contracts. The new standard applies a current value approach to measuring insurance contracts and recognises profit as insurers provide services and are released from risk. Introduction IFRS 17 Insurance contracts

The profit or loss earned from underwriting activities are reported separately from financing activities. Detailed note disclosures explain how items like new business issued, experience in the year, cash receipts and payments, and changes in assumptions affected the performance and the carrying amount of insurance contracts. Introduction IFRS 17 Insurance contracts

IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued, reinsurance contracts Read more

General model in Insurance contracts measurement

The general model of measurement of insurance contracts in IFRS 17 is based on estimates of the fulfilment cash flows and contractual service margin.

Contractual service margin

Contractual service margin – The fourth element of the building blocks in the general model is the contractual service margin (the CSM). This is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the entity will recognise as it provides services in the future.

Here is how the contractual service margin fits into the general model of measurement of insurance contracts. The general model is based on the following estimation parameters:

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IFRS 17 Full retrospective approach

IFRS 17 Full retrospective approach – When insurers apply IFRS 17 for the first time, the transition provisions of IFRS 17 require full retrospective application. However, a modified retrospective approach or a fair value method are allowed under circumstances where the full retrospective approach is impracticable.

Applying the full retrospective approach for IFRS 17 means that the contractual service margin (CSM) at the date of transition to IFRS 17 will be based on an assessment of the CSM (unearned profits) for each group of contracts at inception of the group and a roll-forward of those amounts to the transition date. The CSM at transition will be an important aspect of the capital impact on transition and on future accounting … Read more


It is impracticable to apply a requirement if the entity cannot apply it after making every reasonable effort to do so. ‘Impracticable’ is a high hurdle.

Insurance contract

Insurance contract - A contract under which one party (the issuer) accepts significant insurance risk from another party by agreeing to compensate damage

Risk adjustment for non-financial risks – 1 Best complete guide

Risk adjustment for non-financial risks

– The third element of measuring fulfilment cash flows in the general model (see ‘General model of measurement of insurance contracts’) is a risk adjustment for non-financial risk.

Here is how the risk adjustment for non-financial risks fits into the general model of measurement of insurance contracts. The general model is based on the following estimation parameters:

  • fulfillment cash flows, comprising of:Risk adjustment for non financial risks
    • a current estimate of unbiased and probability-weighted future cash flows expected to arise during the life of the contract;
    • a discount adjustment to reflect the time value of money and financial risks, such as liquidity and currency risks (layers of discounting);
    • an explicit risk adjustment for non-financial risks; and
  • a contractual
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