The TRG discussed several implementation questions about the new insurance contracts standard.
The TRG provided useful observations on a number of challenging questions. Our articles summarise the key takeaways.
Insurers sometimes simultaneously issue different contracts to the same policyholder. If there are indicators that multiple insurance contracts reflect a single contract in substance, then an insurer should apply judgement to determine whether it is appropriate to combine them.
Read more | Identifying the insurance contract ►
When determining the contract boundary, an insurer assesses how its practical ability to reprice a contract may be constrained. Additional considerations apply when determining the boundary for contracts with a policyholder option to add coverage.
Read more | Defining contract boundaries ►
If a reinsurer has the right to reprice a reinsurance contract subject to a notice period and the cedant is compelled to pay reinsurance premiums, then the expected cash flows after the notice period are included within the contract boundary of the reinsurance contract held.
Read more | Accounting for reinsurance contracts held ►
The CSM of a group of insurance contracts is recognised in profit or loss based on the coverage units in the group, reflecting the service provided in each period. In determining coverage units, insurers need to develop systematic, rational methods to reflect services provided in each period.
For direct participating contracts, coverage units should reflect both insurance and investment-related services provided. TRG members also discussed what services should be considered in determining coverage units for other contracts with investment components.
Read more | Measuring the CSM ►
When measuring the risk adjustment, the individual entity issuing the contracts considers any benefits of diversification that occur at a level higher than the entity if, and only if, they have been included when determining the compensation it requires for bearing non-financial risk.
Insurers may want to use the same risk adjustment at group level and at the individual issuing entity level for the same group of insurance contracts.
Read more | Measuring insurance cash flows ►
The IASB will be informed of the TRG discussion. This is expected to help the Board determine what, if any, action is needed to address the implementation questions discussed.
The TRG’s next meeting will be held on 26 September.
Stakeholders are encouraged to submit implementation questions to the TRG as long as they meet certain criteria. To be considered for discussion at the TRG’s next meeting, questions should be submitted by 20 July. To find out more about the criteria or to submit a question, visit the IASB’s TRG for Insurance Contracts page.
We would like to acknowledge the principal authors of the May 2018 Transition to IFRS 17 articles:
Albert Chai, Bryce Ehrhardt and Hagit Keren.
We would also like to thank the following reviewers for their input:
Alan Goad, Joachim Kölschbach, Chris Spall and Mary Trussell.
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