The Committee on Property and Casualty Insurance Financial Reporting (PCFRC) has prepared this educational note to summarize some of the accounting and actuarial implications affecting reinsurance contracts issued and reinsurance contracts held related to IFRS® 17 Insurance Contracts (IFRS 17 or the Standard) requirements.
Although prepared by the PCFRC with P&C reinsurance contracts in mind, much of the content in this educational note could also apply to Life reinsurance contracts. It is therefore recommended that Life practitioners also review this note, as guidance contained herein could be relevant and helpful for Life reinsurance as well.
The background on accounting treatment of reinsurance contracts outlined in this educational note is at a high level; additional information that provides more detail on this topic can be found in International Actuarial Association (IAA) guidance or other CIA documents.
The purpose of this educational note is to provide the reader with possible interpretations of the Standard, without advocating any particular approach. Each topic presented in this document addresses the implications of the Standard for either a reinsurance contract issued, a reinsurance contract held, or both: level of aggregation, fulfilment cash flow (FCF) projections, insurance revenue considerations, estimation of the liability/asset for remaining coverage (LRC/ARC), and the accounting treatment for residual market mechanisms.