IFRS 17 – September 2018 TRG meeting summary
IFRS 17 – September 2018 TRG meeting summary
TRG members discussed several implementation questions about the new standard
TRG members provided useful observations on a number of challenging questions. Our articles summarise the key takeaways.
Topics discussed
Applying the annual cohorts requirement to contracts that share in the return of a specified pool of underlying items
Insurers may be able to measure contracts with a risk-sharing mechanism at a higher level than the annual cohort only if they can achieve the same accounting outcome.
Read more | Measuring the CSM ►
Determining discount rates using a top-down approach
IFRS 17 allows an insurer to use a reference portfolio to determine the discount rates used to measure insurance contracts. An insurer may choose to use its own assets as the reference portfolio, raising questions around the impact of changes to the asset mix on the discount rate and highlighting the importance of disclosures to financial statement users.
Read more | Measuring insurance cash flows ►
Cash flows that are outside the contract boundary on initial recognition
The complexity that arises when insurance contracts contain options for additional coverage highlights the need for insurers to fully understand and assess the impact of the contract boundary requirements.
Read more | Defining contract boundaries ►
Ceding commissions and reinstatement premiums
The economic effects of exchanges between reinsurers and cedants need to be assessed to determine the appropriate presentation of ceding commissions paid to the cedant, and reinstatement premiums paid to the reinsurer.
Read more | Applying presentation and disclosure requirements ►
Accounting for group insurance policies
Due to the diverse nature of group insurance policies, it is important to identify both the insurance contracts and the policyholders, and then determine the contract boundaries in order to account for them appropriately.
Read more | Defining contract boundaries ►
Scope of IFRS 17 – Loan contracts with an insurance component
Some loan contracts may contain an insurance component, placing them entirely in the scope of IFRS 17. This could result in complexities for lenders who have not previously applied insurance accounting.
Read more | Identifying the insurance contract ►
Accounting for the risk adjustment in industry pools managed by an association
Industry pool arrangements are common in many jurisdictions. However, the wide range of legal and contractual forms will require careful analysis in order to account for them appropriately. It is important that the risk adjustment reflects the substance of the arrangements.
Read more | Measuring insurance cash flows ►
Accounting for insurance risk consequent to an incurred claim
Insurers may reach different conclusions on what the insured event is for contracts containing an insurance risk that only arises if the policyholder makes a claim. An insurer will need to apply judgement, based on specific facts and circumstances, to determine an accounting policy that provides the most useful information to users.
Read more | Measuring the CSM ►
Next steps
The IASB will be informed of the TRG members’ discussion. This is expected to help the Board determine what, if any, action is needed to address the implementation questions discussed.
The next TRG meeting was originally scheduled to be held on 4 December 2018, but has been deferred to 4 April 2019.
Stakeholders are encouraged to submit implementation questions as long as they meet certain criteria. To be considered for discussion at the next TRG meeting, questions should be submitted by 14 February 2019. To find out more about the criteria or to submit a question, visit the IASB’s TRG for Insurance Contracts page.
Find out more
For KPMG's insights ontransitioning to the new standard, visit IFRS – Insurance.
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Acknowledgements
We would like to acknowledge the principal authors of the September 2018 Transition to IFRS 17 articles:
Albert Chai, Ali Hudson and Hagit Keren.
We would also like to thank the following reviewers for their input:
Alan Goad, Joachim Kölschbach, Chris Spall and Mary Trussell.
