Members discussed investment components in insurance contracts
TRG members provided useful observations on a number of topics. The points raised in the TRG's discussion are likely to help insurers implement IFRS 17's requirements.
Under IFRS 17, insurers are required to identify investment components within an insurance contract. This raises several questions about how an insurer:
Read more | Identifying the insurance contract ►
The TRG also reported on a number of questions submitted. IFRS 17’s requirements are clear for most of these questions, but some interesting observations were made on a few topics.
TRG members made noteworthy observations on the following topics on measuring insurance cash flows.
Read more | Measuring insurance cash flows ►
When determining whether a contract is a direct participating contract, an insurer determines the share of fair value returns allocated to the policyholder. In some arrangements, the premium for mortality cover is charged to the underlying items. A TRG member observed that when this premium is variable based on the fair value of the underlying items (rather than a fixed amount), it is important to look through that arrangement to determine whether the contract meets the eligibility criteria.
An insurer can choose to disaggregate changes in the risk adjustment for non-financial risk between those caused by the effects of the time value of money and other financial risks and those caused by non-financial risks. The staff plans to recommend that the International Accounting Standards Board (the Board) discuss this point at its April 2019 meeting, to clarify that this choice impacts the measurement of any adjustment to the contractual service margin. A TRG member expressed concern because they believed that this choice was intended to be a presentation choice only.
At their May 2019 meeting, the Board will be informed of the TRG members’ discussion on the topics that were not already addressed at the April Board meeting. This is expected to help the Board determine whether and what action is needed to address the implementation questions discussed.
No further TRG meetings are scheduled. Future meetings will be scheduled depending on the number and the nature of submissions received.
The April 2019 TRG meeting follows on from the Board's recent tentative decisions to:
The Board will review all of the proposed amendments to IFRS 17, including miscellaneous minor improvements, holistically on 9 April 2019.
All of these actions are subject to the Board’s normal due process, which requires that an exposure draft be published followed by a public comment period, which is typically 120 days but could be shorter. The Board intends to publish the exposure draft at the end of June 2019.
We would like to acknowledge the principal authors of the April 2019 Transition to IFRS 17 articles:
Albert Chai, Alana Hudson, Hagit Keren and Lindsey Stewart.
© 2019 KPMG IFRG Limited is a UK company, limited by guarantee. All rights reserved. KPMG IFRG Limited, registered in England No 5253019. Registered office: 15 Canada Square, London, E14 5GL, UK.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.