Frequently Asked Questions – IFRS 17

Introduction Under the supervision of the IAA the below questions has been answered around the IFRS 17 regulation. It is an educational document on an actuarial subject that has been adopted by the IAA in order to advance the understanding of the subject by readers of the chapter, including actuaries and others, who use or rely upon the work of actuaries. Link to IFRS 17 Published Documents page. More questions…

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EIOPA Stress Test 2018-2019

EIOPA plans to release a stress test report in January 2019. Regular tool Stress tests are one of the regular supervisory tools used to assess the resilience of the insurance sector. 2018 Test The 2018 exercise is tailored to assess the vulnerability of the European insurance sector to specific adverse scenarios and will be based on a sample of 42 insurance groups. The scenarios encompass a wide range of risks,…

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Possible delay of IFRS 17?

Possible delay of IFRS 17? Recently voices have been raised in this regards. As a result Insurance Europe, the European insurance and reinsurance federation, has called for the new IFRS 17 standard to be reopened. And that the implementation of IFRS 17 is delayed by two years. The reason would be to address several underlying issues and allow time for companies to prepare. It said that the additional time would allow…

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IFRS 17 – Insurance Contracts

Introduction IFRS 17 is fast approaching. Let's be ready. As a background IFRS 17 is replacing IFRS 4 on insurance contracts. The project has lived for some 20 years already. Find out what's it all about and how it will impact the insurance business. The practise around the standard will still have to evolve once it is adopted. That phase is usually driven by the key players in the market…

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Premium rates – Pricing

Rate making, or insurance pricing, is the calculation of rates charged by insurance companies. The benefit of pricing is to ensure insurance companies are setting fair and adequate premiums given the competitive nature. The concept has many factors to consider. For instance Premiums should be set so that the company can afford to pay the claims, even in the long run. This is why companies also should consider expenses, cost of capital etc. Premiums should be…

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IFRS 17 – Feedback statement

Core measurement approach "The Board confirmed the core measurement approach proposed in the 2010 and 2013 Exposure Drafts and took a number of steps to address the feedback on the determination of the inputs for the measurement of insurance contracts. The following pages include further information about the steps taken by the Board. The Board also developed a simplified approach to measure some simpler insurance contracts (see 5.3—Premium allocation approach)."…

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Audit – explained in 5 steps

For a financial statement audit the overall objective is to gather enough audit evidence to be able to issue an opinion, on management assertions.   Phases of the work Management Assertions One way to describe these are through the below six items, PCAOB/ASB Key Question Procedures Completeness All transactions recorded? In the right period? Inspection, tracing/vouching Existence Assets really exist? Transactions really occurred? Inspection Accuracy Transactions recorded accurately? Inspection Valuation…

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IFRS 4 – Insurance Contracts

Scope IFRS 4 Insurance Contracts applies, with limited exceptions, to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds. IFRS 4 was issued in March 2004 and applies to annual periods beginning on or after 1 January 2005. Definition of insurance contract An insurance contract is a "contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to…

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Reserving Techniques – Chain-Ladder

The Chain-Ladder is an reserving technique often used to predict future claims for an insurance company. It uses run-off triangle of paid or incurred losses. There are several considerations as not to distort the numbers, for instance changes in premium. This subject can be made arbitrary complex however for the purpose in this text we assume that this has been handled and we focus on the practical steps to be…

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