4. IFRS 17 Insurance Contracts Effects Analysis

Question 1

Benefits of IFRS 17

Answer 1

• Better reflect economic reality
• Reduced use of non-GAAP financial measures
• Improved comparability and transparency (Between companies, similar contracts and industries)
• Capital available to insurers will increase

Question 2

Implementation costs of IFRS 17

Answer 2

• Project design and implementation
• Process changes
• Systems set up
• Education and communication

Question 3

Ongoing costs of IFRS 17

Answer 3

• Updating assumptions
• Adjusting CSM
• Providing disclosures

Question 4

Cost mitigation of IFRS 17

Answer 4

• One framework
• Liability adequacy test not required
• Scope exclusions
• Contract grouping
• Optional simplified approach
• Options for changing discount rates
• Transition relief
• Enhanced integration between risk management and financial reporting
• Reduced need to produce non-GAAP information

Question 5

Why IFRS 17 was developed

Answer 5

IFRS 4 does not address how to measure insurance contracts. There are currently a wide range of insurance accounting practices

Question 6

Key Improvements IFRS 17

Answer 6

Current value of financial options and guarantees
Comparable revenue
Consistent recognition of profit for insurance services, treatment of acquisitions costs, accounting for policies and non-insurance components
Appropriate discount rates
Single approach for all insurance components
Explicit risk adjustment

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Grouping contracts at initial recognition in a way that reflects profitability
Use of current estimates
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Making onerous contracts visible in a timely way

Question 7

IFRS and ALM

Answer 7

1. reduction in accounting mismatches
2. company assets strategies will likely shift
3. elimination of stop-gap “overlay approach”