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IFRS 17 Insurance Contracts and Other Information

IFRS 17 Insurance Contracts

IFRS 17 Insurance Contracts:The new IFRS standard for insurance contract accounting, IFRS 17, is expected in early 2017 with an effective date by 2021. It will be a complex standard that includes some fundamental differences to current accounting for liability measurement and profit recognition.

The financial and operational implications of IFRS 17 adoption will vary by entity. However, the standard will represent a fundamental change in most insurers’ accounting practices and provide a major challenge for large parts of the industry. However, there are opportunities to optimize adoption, both operationally and in terms of financial performance.

A structured approach to IFRS 17 implementation project planning will help insurers overcome the challenges and build on the opportunities it presents. This publication describes what insurers might do depending on their current status.

The accounting standard IFRS 17 sets out a single principle-based standard for the recognition, measurement, presentation and disclosure of all types of insurance contracts. Find articles, books and online resources providing quick links to the standard, summaries, guidance and news of recent developments.

Other Definition of IFRS 17

IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017. It will replace IFRS 4 on accounting for insurance contracts and has an effective date of 1 January 2021.

Under the IFRS 17 model, insurance contract liabilities will be calculated as the present value of future insurance cash flows with a provision for risk.The discount rate will reflect current interest rates. If the present value of future cash flows would produce a gain at the time a contract is issued the model would also require a “contractual service margin” to offset the day 1 gain. The contractual service margin would amortize over the life of the contract. There would also be a new income statement presentation for insurance contracts, including a revised definition of revenue, and additional disclosure requirements.

IFRS 17 Insurance Contracts

IFRS 17 will also have accommodations for certain specific types of contracts. Short-duration insurance contracts will be permitted to use a simplified unearned premium liability model until a claim is incurred. And for some contracts in which the cash flows are linked to underlying items, the liability value will reflect that linkage.

In South Korea there is concern that the use of current interest rates, rather than book yields, to discount the insurance liabilities will cause some insurers to show significantly higher insurance liabilities.In other countries there are concerns about volatility of accounting results.

IFRS 17 Insurance Contracts

IASB chairman Hans Hoogervorst regards the use of a current discount rate as one of the benefits of the new standard, stating that by doing otherwise “the devastating impact of the current low-interest-rate environment on long-term obligations is not nearly as visible in the insurance industry as it is in the defined benefit pension schemes of many companies.”He also stated that current discount rates would “increase comparability between insurance companies and between insurance and other parts of the financial industry, such as banks and asset management.” Other benefits Hoogervosrt sees in the new standard are increased consistency across companies in accounting for insurance contracts and a more theoretically valid measurement of revenue.


September 2001Added to the IASB’s agenda
September 2004Insurance Working Group appointed
3 May 2007Discussion Paper Preliminary Views on Insurance Contracts published
30 July 2010Exposure Draft ED/2010/8 Insurance Contracts published
Fourth quarter 2010Roundtables
20 June 2013ED/2013/7 Insurance Contracts published
18 May 2017IFRS 17 Insurance Contracts published

IFRS 17 Insurance Contracts: Objective

IFRS 17 Insurance Contracts establishes the standards for acknowledgment, estimation, introduction and divulgence of Insurance contracts inside the extent of the Standard. The goal of IFRS 17 is to guarantee that a substance gives significant data that dependably speaks to those agreements. This data gives a reason for clients of money related articulations to evaluate the impact that protection contracts have on the element’s budgetary position, monetary execution and money streams.

IFRS 17 Insurance Contracts: Scope

An entity shall apply IFRS 17 Insurance Contracts to:

  • Insurance contracts, including reinsurance contracts, it issues;
  • Reinsurance contracts it holds; and
  • Investment contracts with discretionary participation features it issues, provided the entity also issues insurance contracts.

A few contracts meet the meaning of a protection contract however have as their main role the arrangement of administrations for a settled charge. Such issued contracts are in the extent of the standard, unless a substance applies to them IFRS 15 Revenue from Contracts with Customers and gave the accompanying conditions are met:

  • (a) the entity does not reflect an assessment of the risk associated with an individual customer in setting the price of the contract with that customer;
  • (b) the contract compensates the customer by providing a service, rather than by making cash payments to the customer; and
  • (c) the insurance risk transferred by the contract arises primarily from the customer’s use of services rather than from uncertainty over the cost of those services.

IFRS 17 Insurance Contracts: Disclosures

An entity shall disclose qualitative and quantitative information about:

  • (a) the amounts recognised in its financial statements that arise from insurance contracts;
  • (b) the significant judgements, and changes in those judgements, made when applying IFRS 17; and
  • (c) the nature and extent of the risks that arise from insurance contracts

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