The Committee on Life Insurance Financial Reporting (CLIFR) has prepared this educational note to provide guidance related to the completion of a market consistent valuation for insurance contracts with financial guarantees within the scope of the International Financial Reporting Standard (IFRS) 17.
The educational note is structured in five sections. Section 1 introduces the content presented in this educational note. Section 2 discusses the use of stochastic modelling with an emphasis on expected practices for the IFRS 17 valuation of insurance contracts with financial guarantees. Section 3 outlines how stochastic scenarios can be determined such that they replicate market observable prices, plus potential methodologies to estimate market prices when they are not observable. Section 4 discusses adjustments (e.g., liquidity adjustments, etc.) that may be made to reflect the differences between market instruments and the financial guarantees within insurance contracts. Section 5 outlines additional items with a specific focus on segregated funds.