CHAPTER FOUR

INSURANCE CONTRACTS

Objective
IFRS 17 Insurance Contracts establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts within the scope of the Standard. The
objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully
represents those contracts. This information gives a basis for users of financial statements to
assess the effect that insurance contracts have on the entity’s financial position, financial
performance and cash flows.
An entity shall consider its substantive rights and obligations, whether they arise from a
contract, law or regulation, when applying IFRS 17. A contract is an agreement between two or
more parties that creates enforceable rights and obligations. Enforceability of the rights and
obligations in a contract is a matter of law. Contracts can be written, oral or implied by an
entity’s customary business practices. Contractual terms include all terms in a contract, explicit
or implied, but an entity shall disregard terms that have no commercial substance (ie no
discernible effect on the economics of the contract). Implied terms in a contract include those
imposed by law or
regulation. The practices and processes for establishing contracts with customers vary across
legal jurisdictions, industries and entities. In addition, they may vary within an entity (for
example, they may depend on the class of customer or the nature of the promised goods or
services).
Scope
An entity shall apply IFRS 17 Insurance Contracts to: [IFRS 17:3]
o Insurance contracts, including reinsurance contracts, it issues;

o Reinsurance contracts it holds; and

o Investment contracts with discretionary participation features it issues, provided the entity
also issues insurance contracts.

Some contracts meet the definition of an insurance contract but have as their primary purpose
the provision of services for a fixed fee. Such issued contracts are in the scope of the standard,

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 unless an entity chooses to apply to them IFRS 15 Revenue from Contracts with Customers and
provided the following conditions are met: [IFRS 17:8]
o (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;

o (b) the contract compensates the customer by providing a service, rather than by making cash
payments to the customer; and

o (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.

What is insurance risk? IFRS 17.A, B11 ‘Insurance risk’ is a risk, other than financial risk,
that is transferred from the policyholder to the issuer of a contract. The issuer accepts a risk
from the policyholder that the policyholder was already exposed to.
A contract is not an insurance contract if it exposes the issuer only to financial risk but not to
significant insurance risk. However, contracts that expose the issuer to both financial risk and
significant insurance risk are insurance contracts. For example, a life insurance contract with a
guaranteed minimum rate of return (financial risk) and a promised death benefit that may
significantly exceed the policyholder’s account balance (insurance risk) is an insurance contract.
When is insurance risk ‘significant’? IFRS 17.B18–B21 Insurance risk is significant only if
there is a scenario that has commercial substance in which, on a present value basis, there is a
possibility that an issuer could: – suffer a loss caused by the insured event; and – pay significant
additional amounts beyond what would be paid if the insured event had not occurred. To have
commercial substance, a scenario has to have a discernible effect on the economics of the
transaction. IFRS 17.B23 For example, life insurance contracts in which the amount paid on
death is higher than on surrender or maturity can meet the definition of an insurance contract,
unless the amount contingent on death is insignificant in all scenarios. IFRS 17. B22.
The significance of insurance risk is assessed on a contract-by-contract basis. As a result, even
if there is a minimal probability of significant losses for a portfolio or group of contracts,
insurance risk can be significant for an individual contract. IFRS 17.B18. In addition, insurance
risk can be significant even if the insured event is extremely unlikely to occur, or if the expected
probability-weighted present value of the contingent cash flows is a small proportion of the
expected probability-weighted present value of all of the remaining contractual cash flows.
IFRS 17.B20 When determining whether significant additional amounts will be paid in any
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scenario, an entity needs to consider the impact of the time value of money using a discount
rate. If a contract requires an entity to make payments earlier than expected on the occurrence of
an insured event and the cash value of those payments is not adjusted to reflect the time value of
money, then there may be scenarios in which additional amounts are payable on a present value
basis. For similar reasons, a contract that delays timely reimbursement to the policyholder can
eliminate significant insurance risk, because the delayed payments may have a lower present
value.
What is an ‘uncertain future event’? IFRS 17.B3, Transfer of uncertainty (or risk) is the
essence of an insurance contract. Therefore, for a contract to be an insurance contract,
uncertainty is required at the contract’s inception over at least one of the following: – the
probability that an insured event will occur; – when it will occur; or – how much the insurer will
need to pay if it occurs. IFRS 17.B
Some insurance contracts cover events that have already occurred but for which the ultimate
pay-out is still uncertain – e.g. insurance contracts that provide coverage against adverse
development of existing claims. In these cases, the insured event is the determination of the
ultimate cost of the claim.
What is an ‘adverse effect’ on the policyholder? IFRS 17.B12–B13.
The definition of an insurance contract requires an adverse effect on the policyholder as a
precondition for compensation. IFRS 17.7(g), B14–B15 ‘Lapse risk’ or ‘persistency risk’ is the
risk that the policyholder will cancel the contract at a time other than when the issuer expected
when pricing the contract. This risk is not considered an insurance risk because the payment to
the policyholder is not contingent on an uncertain future event that adversely affects the
policyholder. The risk of unexpected increases in the administrative costs associated with
servicing a contract is known as ‘expense risk’. This risk does not include unexpected costs
associated with the insured event and is not an insurance risk, because an unexpected change in
these expenses does not adversely affect the policyholder. However, if the issuer of a contract: –
is exposed to lapse, persistency or expense risk; and – mitigates those risks by using a second
contract to transfer all or part of those risks to another entity, then the second contract exposes
the other entity to insurance risk. Therefore, the second contract can meet the definition of an
insurance contract from the perspective of the other entity. However, from the perspective of the
entity that used this contract to transfer the risk to the other insurer, this second contract is a

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contract of direct insurance that it holds (the entity is a policyholder and the contract is not a
reinsurance contract held) and therefore the entity does not apply IFRS 17 to it.
What happens when the level of insurance risk changes? IFRS 17.B24–B25.
Some contracts do not transfer any insurance risk to the issuer at inception, but do transfer it
later. These contracts are not considered to be an insurance contract until the risk transfer
occurs. For example, a contract may provide a specified investment return and also specify that
the policyholder can elect to receive a life-contingent annuity at then-current annuity rates
determined by the entity when the annuity option is exercised. This will not be an insurance
contract until the election is made, because it does not transfer insurance risk until that point.
For a similar contract to be an insurance contract at the outset, the annuity rate or the
determination basis needs to be specified at inception of the contract (unless the insurance risk
is insignificant).
A contract that meets the definition of an insurance contract remains an insurance contract until
all rights and obligations expire (or it is derecognized because its terms are modified
When do reinsurance contracts meet the definition? IFRS 17.B19
Reinsurance contracts are also insurance contracts that need to meet the definition of an
insurance contract. However, even if a reinsurance contract does not expose the reinsurer to the
possibility of a significant loss, it is still deemed to transfer significant insurance risk if it
transfers substantially all of the insurance risk relating to the reinsured portions of the
underlying insurance contracts to the reinsurer.

4.1. Insurance Contract Aggregation

What Is Aggregate Insurance?
Most business owners opt to take out insurance policies to cover themselves, their businesses,
and their employees. You would assume that when a policy like this is taken out, your company
is covered for everything. However, that isn’t necessarily the case, as every insurance policy has
its limits. The fact is that aggregate limits are a normal part of business insurance policies, and
almost every policy will have one. Most business insurance policies have aggregate limits
written into their policy terms, including professional liability insurance and general liability
insurance.
What Is Aggregate Insurance, and Why Is There a Limit?
Unsure about what aggregate insurance is and why there is a limit? The aggregate insurance
definition is the highest amount of money the insurer will pay for all of your losses during a
policy period—this period typically lasts for one year. On certain types of insurance coverage,
an aggregate limit is put in place.

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Understanding the Aggregate Limit
The aggregate limit on each insurance policy is written into the policy terms; it’s also something
that the customer can customize when initially taking out the policy. However, the greater the
aggregate limit, the higher the insurance policy premium.
Therefore, it’s important to be clear on the aggregate limit on your policy before you take the
policy out to ensure that the price is affordable and the limit meets your expectations.
The aggregate limit means that if a policy has a limit of £20 million, and within one policy
period filed claims total £30 million, the insurance company is only liable to pay £20 million.
This means that the outstanding fees would be paid by you and your company.

Level of aggregation – Interaction between contracts in different groups. The requirement for
groups to be limited to periods covering one year or less is based on the amounts to be reported,
not necessarily the methodology used to arrive at those amounts. Therefore, it could be possible
that an entity need not restrict groups in this way to achieve the same accounting outcome in
some circumstances. For example, for contracts in groups that fully share risks with contracts in
another group, the groups together will give the same results as a single, combined risk-sharing
portfolio.
Level of aggregation used for estimation IFRS 17.24
When measuring groups of contracts; an entity may estimate the fulfillment cash flows at a
higher level of aggregation than a group, as long as it is able to include the appropriate
fulfillment cash flows in the group that it is measuring by allocating these estimates to its
groups of contracts.
An entity is permitted to determine the expected cash flows, discount rates and the risk
adjustment for non-financial risk at a higher level than a group or portfolio, as long as it is
able to allocate these estimates to groups of contracts, so that the appropriate fulfillment cash
flows can be included in the measurement at the group level. Many entities will determine
the fulfillment cash flows of groups using estimates determined at a higher level than the
group for some estimates, as similar methods are currently used. However, an entity using
IFRS 17’s groups for the first time may need to develop or update its allocation capabilities
to be able to allocate the estimates to the group level, which may be more granular.
Entities will need to balance the benefits of aggregating large volumes of contract data, to the
extent possible, against the complexity of establishing and maintaining aggregation
methodologies that will comply with IFRS 17.

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 Some entities may already have actuarial valuation systems that support, or have the
capability to support, measurements at a granular level, including, in some cases, the
individual contract level. Consequently, it may be easier for these entities to determine the
fulfillment cash flows at a level lower than the groups required by IFRS 17, and aggregate
the measurement to a group level.
However, some entities may currently undertake a policy valuation at an aggregated level
that does not align with IFRS 17’s grouping requirements. This could mean that significant
system, data or valuation methodology changes are needed to support the measurement of the
fulfillment cash flows.
The aggregation of contracts into groups is required on initial recognition for all contracts in
the scope of IFRS 17. IFRS 17.BC119.
The grouping of individual contracts under IFRS 17 is performed in a way that limits the
offsetting of profitable contracts against onerous ones, having regard to how insurers manage
and evaluate the performance of their business. IFRS 17.24
The groups are established on initial recognition and are not reassessed subsequently. IFRS
17.14 In determining the level of aggregation, an entity identifies portfolios of insurance
contracts. IFRS 17.16
An entity divides each portfolio into a minimum of: – a group of contracts that are onerous
on initial recognition, if there are any– a group of contracts that, on initial recognition, have
no significant possibility of becoming onerous subsequently, if there are any; and – a group
of any remaining contracts in the portfolio. IFRS 17.17, BC129.
The objective is to identify contracts that fit into these groups at an individual contract level.
This can be achieved by assessing a set of contracts if the entity can conclude, using
reasonable and supportable information, that the contracts in the set will all be in the same
group. IFRS 17.22.
An entity cannot include contracts issued more than one year apart in the same group.
Therefore, each portfolio will be disaggregated into annual cohorts, or cohorts consisting of
periods of less than one year. However, exceptions apply in certain circumstances on
transition.
4.2. Initial Recognition of Insurance Contracts

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 There are several criteria to determine when an entity recognizes a group of insurance
contracts. 4.1 When to recognize a group of contracts IFRS 17.25–26 An entity recognizes a
group of insurance contracts that it issues from the earliest of:
– the beginning of the coverage period of the group of contracts;
– the date when the first payment from a policyholder in the group becomes due; and
– for a group of onerous contracts, when the group becomes onerous.
If there is no due date specified in the contract, and then it is considered to be the date when
the first payment is received from the policyholder. IFRS 17.28 A group of contracts initially
recognized in a reporting period only includes contracts that individually meet one of these
three recognition criteria by the reporting date. New contracts are added to the group in
subsequent reporting periods in which any new contracts are recognized. For the interaction
of the initial recognition requirements and the level of aggregation
Example – Recognition of an insurance contract Fact pattern – Entity X is bound by the
terms of an insurance contract at 1 June 2023. – The coverage period of the insurance
contract starts on 1 January 2024, which is also the premium due date. – This example
assumes that the group comprises only this contract.
Analysis
On 1 June 2023 and at each reporting date between 1 June 2023 and 31 December 2023 – i.e.
the pre-coverage period – X assesses whether any facts or circumstances indicate that the
group is onerous. If it is, then X recognizes the group on the date when the group becomes
onerous. If it is not, then X recognizes the group on 1 January 2024.
4.3. Initial Measurement of Insurance Contracts
Measurement
On initial recognition, an entity shall measure a group of insurance contracts at the total of:
[IFRS 17:32]
o (a) the fulfillment cash flows (“FCF”), which comprise:

o (i) estimates of future cash flows;

o (ii) an adjustment to reflect the time value of money (“TVM”) and the financial risks associ-
ated with the future cash flows; and

o (iii) a risk adjustment for non-financial risk

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o (b) the contractual service margin (“CSM”).

An entity shall include all the future cash flows within the boundary of each contract in the
group. The entity may estimate the future cash flows at a higher level of aggregation and then
allocate the resulting fulfillment cash flows to individual groups of contracts. [IFRS 17:33]
The estimates of future cash flows shall be current, explicit, unbiased, and reflect all the infor-
mation available to the entity without undue cost and effort about the amount, timing and uncer-
tainty of those future cash flows. They should reflect the perspective of the entity, provided that
the estimates of any relevant market variables are consistent with observable market prices.
[IFRS 17:33]
4.4. Estimated Future Cash Flows
IFRS 17 requires estimates of expected cash flows of a group of insurance contracts to: –
incorporate all reasonable and supportable information that is available without undue cost or
effort about the amount, timing and uncertainty of those expected cash flows in an unbiased
way; – include all the expected cash flows within the boundary of each contract within the
group; – reflect the perspective of the entity, provided that, when relevant, the estimates are
consistent with observable market prices; and – be current and explicit. The expected cash flows
may be estimated at a higher level of aggregation and then allocated to groups of contracts.
These characteristics raise the following questions, which will be discussed in this chapter. –
How are different possible outcomes incorporated in the estimates? – Which cash flows
are included in the estimates? – What information is used to make the estimates?
Cash flows that are included in the estimate. The importance of the contract boundary IFRS
17.33, B61 The measurement of a group of insurance contracts includes all of the expected cash
flows within the boundary of each contract within the group. IFRS 17.35, BC164. The contract
boundary distinguishes the expected cash flows that relate to existing insurance contracts from
those that relate to future insurance contracts. The contract boundary is reassessed at each
reporting date and, therefore, may change over time.
Cash flows are within the contract boundary if they arise from substantive rights and obligations
that exist during the reporting period in which the entity: – can compel the policyholder to pay
the premiums; or – has a substantive obligation to provide the policyholder with insurance
contract services. This substantive obligation ends when: – the entity has the ‘practical ability’
to reassess the risks of the particular policyholder and can set a price or level of benefits that

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fully reflects these reassessed risks; or – both of the following conditions are met: - the entity
has the ‘practical ability’ to reassess the risk of the portfolio of insurance contracts that contains
the contract and can set a price or level of benefits that fully reflects the risk of that portfolio;
and - the pricing of the premiums up to the reassessment date does not take into account the
risks that relate to periods after the reassessment date.
An entity has the ‘practical ability’ to set a price at the renewal date, which fully reflects the
risks in the contract from that date, when it is not restricted from: – setting the same price as it
would for a new contract issued on that date with the same characteristics as the existing
contract; – amending the benefits to be consistent with the price that it will charge; or – setting a
price for an individual contract that reflects overall changes in the risks in a portfolio of
insurance contracts, even if the price set for each individual policyholder does not reflect the
change in risk for that specific policyholder. IFRS 17.2, B61 When determining the contract
boundary, an entity considers its substantive rights and obligations – whether they arise from
contract, law or regulation – and disregards terms that have no commercial substance.
When an entity has the practical ability to reassess the risks of an existing insurance contract but
is restricted from reprising the contract to reflect this reassessment, the contract still binds the
entity, and its related cash flows lie within the existing contract’s boundary. However, if the
restriction has no commercial substance, then the contract does not bind the entity. Therefore,
the substance of the restriction should be analyzed to determine whether the contract binds the
entity. In some jurisdictions, reprising of renewals can be subject to regulatory review and/or
approval, or can only be done within certain limitations. Entities will need to consider the
substance of these restrictions carefully to conclude whether possible renewals are within the
contract boundary. This assessment is made at each reporting date. Therefore, new assessments
of the effects of these restrictions can change the contract boundary over time. An entity will
need to establish processes to identify when there is a change to its previous assessment of the
commercial substance of a restriction.

4.5. Discount Rates Used

The second step in measuring a group of insurance contracts is to apply discounting to reflect
the time value of money.

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 Cash flows are discounted to reflect the time value of money. The discount rate used is
consistent with observable market prices and reflects the cash flows’ characteristics and the
contract’s liquidity.
The estimates of expected cash flows are adjusted to reflect the financial risks associated with
them. This can be achieved by adjusting the estimates of expected cash flows for financial risk,
or by adjusting the discount rate. The effect of changes in financial risks is presented in a
similar way when determining the amounts recognized in the statement(s) of financial
performance, regardless of how they were incorporated in the estimates. For example, if an
entity issues a group of insurance contracts in which the policyholders’ unit values are linked to
a price index, then the financial risk may be reflected implicitly within the estimates of expected
cash flows or as an adjustment to the discount rate. For presentation purposes, changes related
to this variable (together with the effect of the time value of money) are included within
insurance finance income or expense, which is presented separately from the insurance service
result . Currently, an entity might be able to identify these items explicitly. However, it will
need to confirm that its current methodologies are consistent with the principles of IFRS 17. An
entity that prefers to include an implicit adjustment for financial risk may need to adapt its
processes in order to identify the effect explicitly for presentation purposes.
Determining the discount rate IFRS 17.B74–B75 Discount rates are determined on a basis
consistent with other estimates that are used to measure the insurance contracts. For example:
– cash flows that do not vary based on the returns on underlying items are discounted at a
rate that does not reflect such variability – i.e. a risk-free rate adjusted for characteristics of
the cash flows such as illiquidity; – cash flows that do vary based on the returns on any
financial underlying items are discounted using rates that reflect that variability (or adjusted
for the effect of that variability and discounted using a rate that reflects the adjustment
made); – nominal cash flows are discounted at a rate that includes the effect of inflation; and
– real cash flows are discounted at a rate that excludes the effect of inflation. Cash flows that
vary based on the return on underlying items are discounted or adjusted to reflect that
variability, regardless of whether: – the variability arises from contractual terms or discretion
of the issuer; or – the entity holds the underlying items. IFRS 17.B77 When some of the cash
flows vary based on the return on underlying items and some do not, an entity can either: –
divide the cash flows and apply the relevant discount rates for each stream of cash flows; or –

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 apply discount rates appropriate for the estimated cash flows as a whole – for example, using
stochastic modeling techniques or risk-neutral measurement techniques.
Determining the discount rates for contracts with embedded guarantees Insurance contracts
with embedded guarantees can result in some cash flows that are expected to vary directly
with returns on underlying items, and others that are not. For example, when the guaranteed
benefit for a life insurance contract with an investment component is expected to be greater
than the policyholder’s account balance, the cash flows are not expected to vary directly with
the returns from the underlying items. Conversely, when the guaranteed benefit is expected
to be less than the account balance, the cash flows are expected to vary directly with the
returns from the underlying items. In this case, it is likely that practice will develop around a
number of techniques, such as: – discounting each cash flow scenario using a different
discount rate; or – determining one discount rate to be applied to all of the cash flows from
the contract, considering the mixture of cash flow scenarios.
IFRS 17 does not prescribe a single estimation technique to derive discount rates. However,
the standard does specify that a ‘top-down’ or ‘bottom-up’ approach may be used. In theory,
for insurance contracts with cash flows that do not vary based on the performance of the
underlying items, both approaches should result in the same discount rate, although
differences may arise in practice. The example below illustrates these approaches for an
insurance contract with cash flows that do not vary based on the performance of the
underlying items.
Discount rates
The discount rates applied to the estimate of cash flows shall: [IFRS 17:36]
o (a) reflect the time value of money (TVM), the characteristics of the cash flows and the
liquidity characteristics of the insurance contracts;

o (b) be consistent with observable current market prices (if any) of those financial instruments
whose cash flow characteristics are consistent with those of the insurance contracts; and

o (c) Exclude the effect of factors that influence such observable market prices but do not affect
the future cash flows of the insurance contracts.

4.6. Risk Adjustment for Non-Financial Risk

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The third step in measuring a group of insurance contracts is to adjust the present value of
expected cash flows for non-financial risk.
An adjustment to reflect the compensation an entity requires for bearing the uncertainty
about the amount and timing of cash flows that arises from non-financial risk. The risk
adjustment conveys information to users of financial statements about the amount the entity
charges for bearing the uncertainty over the amount and timing of cash flows arising from
non-financial risk. It measures the compensation that the entity would require to make it
indifferent between: – fulfilling a liability that has a range of possible outcomes arising from
nonfinancial risk; and – fulfilling a liability that will generate fixed cash flows with the same
expected present value as the insurance contract.
The risk adjustment for non-financial risk considers risks arising from an insurance contract
other than financial risk. This includes insurance risk and other nonfinancial risks – e.g. lapse
and expense risk. Risks that do not arise from the insurance contract – e.g. general
operational risk – are not included. Although risk adjustments for financial risk can be
included either in the estimates of expected cash flows or in the discount rate, the risk
adjustment for non-financial risk is explicit.
4.7. Contractual Service Margin (CSM)
The final step in measuring a group of insurance contracts on initial recognition is to
determine the unearned profit, represented by the CSM for profitable groups of contracts, or
the loss component for groups of onerous contracts.
On initial recognition of a profitable group of insurance contracts, the CSM is the equal and
opposite amount of the net inflow that arises from the sum of the following: – the fulfillment
cash flows; – the de-recognition of any asset or liability previously recognized for cash flows
related to the group2; and – any cash flows arising from contracts in the group at that date.
An entity calculates a CSM for each group of insurance contracts. For further discussion of
how to group insurance contracts,
4.8. Subsequent Measurement of Insurance Contracts
Generally, at each reporting date the carrying amount of a group of insurance contracts is re-
measured by: – estimating the fulfillment cash flows using current assumptions; and updating
the CSM to reflect changes in fulfillment cash flows related to future services, a financing
effect and the profit earned as insurance contract services are provided in the period. The

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 updated CSM represents the profit that has not yet been recognized in profit or loss because it
relates to future services to be provided.
The sum of the updated fulfillment cash flows and the updated CSM represents the carrying
amount of the group of insurance contracts at each reporting date. 10.2.1 Interest accretion
IFRS 17.44(b), B72(b), B73
For contracts without direct participation features, interest is accreted on the carrying
amount of the CSM during the reporting period using the discount rate applied on initial
recognition to reflect the time value of money. Typically, insurance contracts within a group
are recognized and initially measured on different dates. In determining the appropriate
discount rate to accrete interest on the CSM for the group, entities can use a weighted-
average discount rate over the period during which contracts in the group are issued or a rate
representative for the reporting period. The objective of a weighted-average discount rate is
to approximate an interest rate that would have applied had an individual interest rate been
determined for each contract on the day each contract was added to the group. A discount
rate that is observed on the first calendar day the group of contracts is recognized does not
necessarily reflect an appropriate discount rate for accretion of interest on the CSM for the
group. The discount rate is applied to nominal cash flows that do not vary based on returns
on any underlying items. For further detail on determining the discount rate When an entity
adds contracts to an existing group in a new reporting period, this may result in a change in
the discount rates determined on initial recognition. In this case, the entity applies a revised
weighted-average discount rate from the start of the reporting period in which the new
contracts are added to the group.
4.9. Modification of Insurance Contracts
If the terms of an insurance contract are modified, an entity shall derecognize the original
contract and recognize the modified contract as a new contract if there is a substantive modifi-
cation, based on meeting any of the specified criteria. [IFRS 17:72]
The modification is substantive if any of the following conditions are satisfied:
o (a) if, had the modified terms been included at contract’s inception, this would have led to:

o (i) exclusion from the Standard’s scope;

o (ii) unbundling of different embedded derivatives;

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 o (iii) redefinition of the contract boundary; or

o (iv) the reallocation to a different group of contracts; or

o (b) if the original contract met the definition of a direct par insurance contracts, but the
modified contract no longer meets that definition, or vice versa; or

o (c) the entity originally applied the PAA, but the contract’s modifications made it no longer
eligible for it.

4.10. De-recognition of Insurance Contracts

An entity shall derecognize an insurance contract when and only when
It is extinguished, ie when the obligation specified in the insurance contract expires or is
discharged or cancelled; or
Any of the conditions of a substantive modification of an insurance contract are met. [IFRS
17:74]
Presentation in the statement of financial position
An entity shall present separately in the statement of financial position the carrying amount of
groups of: [IFRS 17:78]
(a) insurance contracts issued that are assets;

(b) insurance contracts issued that are liabilities;

(c) reinsurance contracts held that are assets; and

(d) reinsurance contracts held that are liabilities

4.11. Presentation of Insurance Contract Information

There are specific requirements for presenting assets and liabilities, and revenue and
expenses under the general measurement model.
Portfolios of insurance contracts issued that are either assets or liabilities, and portfolios of
reinsurance contracts held that are either assets or liabilities, are presented separately in the
statement of financial position. Included in the carrying amounts for portfolios of insurance
contracts are any assets for insurance acquisition cash flows related to the portfolio. Included
in the carrying amounts for portfolios of reinsurance contracts are any assets or liabilities for
cash flows related to the portfolio.

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 Amounts recognized in the statement(s) of financial performance are disaggregated into: – an
insurance service result comprising: - insurance revenue and - insurance service expenses
(see 13.2.2); and – insurance finance income or expense. IFRS 17.82, 86 Income or expense
from reinsurance contracts held is presented separately from expense or income from
insurance contracts issued. However, income or expense from a group of reinsurance
contracts held, other than insurance finance income or expense, may be presented either as a
single net amount or separately as amounts recovered from the reinsurer and an allocation of
the premiums paid. Insurance revenue and insurance service expenses presented in profit or
loss exclude any investment components, premium refunds and repayment of policy loans.
Even though premiums charged may contain investment components, these investment
components do not represent consideration for providing services and are not included in
insurance revenue. In addition, an entity is prohibited from presenting premium information
that is not considered insurance revenue in other line items in profit or loss.
4.12. Disclosures
An entity shall disclose qualitative and quantitative information about: [IFRS 17:93]
o (a) the amounts recognized in its financial statements that arise from insurance contracts;

o (b) the significant judgments, and changes in those judgments, made when applying IFRS 17;
and

o (c) the nature and extent of the risks that arise from insurance contracts.

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