Insurance Accounting and IFRS 17

Introduction and context

Insurance accounting has historically been characterised by substantial variation between jurisdictions, products and reporting bases. The result was often limited comparability: similar insurance risks could produce different profit patterns depending on local accounting rules. IFRS 17, Insurance Contracts, establishes a comprehensive measurement and presentation framework intended to improve consistency, transparency and comparability.

For insurers, IFRS 17 is not merely an accounting change. It affects product design, profitability analysis, actuarial models, data architecture, performance management, reinsurance, capital planning and investor communication. Its central principle is that insurance contract liabilities should reflect the present value of expected future cash flows, an explicit adjustment for non-financial risk, and the unearned profit that is recognised as insurance services are provided.

IFRS 17 applies to insurance contracts issued, reinsurance contracts held and certain investment contracts with discretionary participation features. It generally applies for annual reporting periods beginning on or after 1 January 2023, subject to the adoption requirements of the relevant jurisdiction.

Learning objectives

By the end of this chapter, the reader should be able to:

1. Explain the scope and core principles of IFRS 17.
2. Distinguish fulfilment cash flows, risk adjustment and contractual service margin.
3. Apply the general measurement model, premium allocation approach and variable fee approach.
4. Explain contract grouping, recognition, coverage units and profit recognition.
5. Analyse interactions between IFRS 17, IFRS 9 and local GAAP.
6. Evaluate disclosure, governance, implementation and managerial consequences.
7. Identify limitations and areas requiring professional judgement.

1. The conceptual architecture of IFRS 17

1.1 What is an insurance contract?

An insurance contract is a contract under which one party—the issuer—accepts significant insurance risk from another party—the policyholder, agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. The uncertainty may concern whether an insured event will occur, when it will occur, or how much the insurer will need to pay.

A contract does not become an insurance contract simply because it is issued by an insurance company. Conversely, an entity that is not traditionally an insurer may issue contracts containing significant insurance risk. Classification therefore depends on contractual substance.

Insurance risk must be distinguished from financial risk. Financial risk arises from changes in variables such as interest rates, equity prices, commodity prices, currency exchange rates or credit indices. A contract transferring only financial risk is generally considered under IFRS 9 rather than IFRS 17, unless another IFRS requirement applies.

1.2 The measurement building blocks

The IFRS 17 liability is constructed from four principal components:

• estimates of future cash flows;
• discounting to reflect the time value of money and financial risk;
• an explicit risk adjustment for non-financial risk; and
• the contractual service margin, representing unearned profit.

The present value of future cash flows and the risk adjustment together are often called fulfilment cash flows.

For a group of insurance contracts, the liability at a reporting date can be expressed conceptually as:

This is a measurement relationship rather than a single universal journal-entry formula. The fulfilment cash flows may be positive or negative depending on whether the group is a net liability or net asset. The contractual service margin cannot be negative at initial recognition; an expected loss is recognised immediately for an onerous group.

1.3 Initial recognition

A group of insurance contracts is recognised at the earliest of:

• the beginning of the coverage period;
• the date on which the first payment from a policyholder in the group becomes due; and
• for an onerous group, the date on which the group becomes onerous.

The insurer must determine the contract boundary. Cash flows outside the boundary are not included in the measurement of the existing contract. The boundary generally ends when the insurer can reprice the contract to reflect fully the risks of that contract or when the insurer no longer has a substantive obligation to provide coverage.

2. Fulfilment cash flows

2.1 Expected future cash flows

The insurer estimates all future cash flows within the contract boundary using probability-weighted expected values. Relevant cash flows can include premiums, claims, benefits, acquisition costs, claims-handling costs, administration costs, policyholder options and other directly attributable costs.

The estimate should be unbiased, current and based on reasonable and supportable information. It should incorporate all available information without double-counting uncertainty. Cash flows must be consistent with observable market variables where relevant.

A probability-weighted expected present value may be represented as:

Here, p_i is the probability of scenario i, CF_i is the cash flow in that scenario, r_i is the appropriate annual discount rate, and t_i is the time in years until the cash flow. The equation assumes discrete scenarios and rates expressed on a basis consistent with the timing convention. In practice, continuous cash flows, term structures and stochastic models may be required.

The estimate is not necessarily the most likely outcome. For example, a claim distribution with a low-probability catastrophic tail may have an expected value materially above the modal claim amount.

2.2 Discount rates

Discount rates reflect the time value of money, characteristics of the cash flows and the liquidity characteristics of the insurance contracts. They must exclude factors already included in the cash-flow estimates. For example, if expected inflation is explicitly included in nominal cash flows, the discount rate should be consistent with nominal cash flows rather than real cash flows.

Two broad techniques are commonly used:

• the bottom-up approach, which starts with a risk-free yield curve and adds an adjustment for differences in liquidity; and
• the top-down approach, which starts with a portfolio yield and removes factors not relevant to the insurance liability.

The selected method must produce rates appropriate for the liability cash flows. Duration, currency, liquidity, optionality and market conditions are important considerations.

2.3 Risk adjustment for non-financial risk

The risk adjustment is the compensation the insurer requires for bearing uncertainty about the amount and timing of cash flows arising from non-financial risk. It may reflect underwriting risk, lapse risk, expense risk, mortality risk, morbidity risk and catastrophe risk, but not financial risk.

IFRS 17 does not prescribe a single technique. Acceptable methods may include a confidence-level method, conditional tail expectation method or cost-of-capital method. The method must be applied consistently and disclosed, including the confidence level equivalent where another technique is used.

For a confidence-level approach, the risk adjustment may be described as:

where RA is the risk adjustment, Q_α(L) is the α-quantile of the loss distribution L, and E(L) is the expected loss. This expression is illustrative and applies only when the selected confidence measure and loss definition are appropriate. It does not mean that every insurer must use a quantile method.

The risk adjustment is entity-specific. Two insurers with identical expected cash flows may report different risk adjustments because they have different risk appetites, diversification benefits, risk-management capabilities or required compensation for uncertainty. The insurer must decide whether diversification benefits are recognised across portfolios, subject to the level at which risk is managed.

2.4 Contractual service margin

The contractual service margin, or CSM, represents unearned profit. At initial recognition, a profitable group does not normally generate immediate profit. Instead, the expected profit is deferred and released as insurance services are provided.

Ignoring certain subsequent adjustments, the initial CSM can be represented as the amount required to prevent a day-one gain:

The sign convention depends on whether cash inflows and outflows are presented as positive or negative. Under the common convention in which premiums are cash inflows and claims and expenses are cash outflows, a profitable group produces a positive CSM. The equation applies at initial recognition to a group that is not onerous and assumes the included items are measured consistently.

The CSM is subsequently adjusted for changes related to future service, such as changes in expected future cash flows that do not relate to past service. It is increased for accretion of interest and decreased when the related service is provided. Changes relating to current or past service generally affect insurance service expense or revenue immediately. Changes arising from financial assumptions may be recognised in profit or loss or other comprehensive income according to the accounting policy and contract characteristics.

3. Contract grouping and portfolio logic

Grouping is one of the most consequential areas of IFRS 17 because it determines how profit and losses are aggregated and released.

3.1 Portfolio

Contracts are first divided into portfolios of contracts subject to similar risks and managed together. Contracts in different product lines, such as motor insurance and annuities, would normally be in different portfolios. A portfolio is not necessarily the same as a legal entity, branch, product code or regulatory reporting class.

3.2 Annual cohorts

Within a portfolio, contracts must generally be divided into groups that contain no more than contracts issued in the same annual period. This requirement prevents profitable contracts issued in later periods from obscuring losses or poor performance in earlier cohorts.

3.3 Profitability groups

Contracts are separated into at least three categories:

1. contracts that are onerous at initial recognition;
2. contracts that, at initial recognition, have no significant possibility of becoming onerous; and
3. remaining contracts.

The insurer may use more granular groups where that is necessary to avoid combining contracts with significantly different profitability patterns.

A group cannot include contracts issued more than one year apart. The insurer must use reasonable and supportable information to assess whether contracts are onerous or have a significant possibility of becoming onerous.

4. Measurement models

4.1 General measurement model

The general measurement model, sometimes called the building-block approach, is the default model. It is suitable for contracts whose cash flows do not meet the conditions for a simplified or variable-fee approach.

Its principal mechanics are:

• estimate future cash flows;
• discount those cash flows;
• add the risk adjustment;
• establish the CSM for unearned profit; and
• update the components as assumptions and experience change.

The model is especially relevant for long-duration life insurance, disability products, annuities and complex protection contracts.

4.2 Premium allocation approach

The premium allocation approach, or PAA, is a permitted simplification for groups when either:

• the coverage period of each contract is one year or less; or
• the insurer reasonably expects that the resulting measurement will not differ materially from the general measurement model.

The liability for remaining coverage is often based on premiums received, less acquisition cash flows paid and adjusted for financing effects where applicable. The liability for incurred claims continues to include fulfilment cash flows, including the risk adjustment.

The PAA is not simply a cash accounting model. Expected claims incurred must still be measured using appropriate estimates, discounting where the effect of the time value of money is significant, and an explicit risk adjustment.

4.3 Variable fee approach

The variable fee approach applies to certain direct participating contracts. The policyholder participates in a clearly identified pool of underlying items, expects a substantial share of fair-value returns, and the insurer expects to pay a substantial proportion of fair value changes to the policyholder.

In such contracts, the insurer’s economic compensation is a variable fee consisting broadly of its share of the fair value of underlying items less fulfilment cash flows. Changes in the insurer’s share of the underlying items that relate to future service generally adjust the CSM rather than immediately affecting profit or loss.

The approach is not available merely because a product has bonuses or profit-sharing features. The contractual terms and economic substance must satisfy the requirements for direct participation.

5. Subsequent measurement and profit recognition

At each reporting date, the insurer updates estimates and separates changes by their relationship to past, current or future service.

Changes relating to future service generally adjust the CSM, provided the CSM remains sufficient. Changes relating to current service are reflected in the current period’s insurance service result. Changes relating to past service are generally recognised immediately in profit or loss.

For a profitable group, the CSM is released to profit or loss over the coverage period in proportion to coverage units. Coverage units reflect the quantity of insurance contract services provided in the period and the expected remaining services. They may incorporate the amount of coverage, the investment-return service where applicable, and the likelihood that policyholders will exercise rights.

A simple illustration is useful. Suppose a group has a CSM of 900 monetary units and expected coverage units of 30 in year one and 20 in year two. Total expected coverage units are 50. If assumptions remain unchanged, CSM release is:

The amounts sum to 900. This is an illustrative allocation, not a universal rule. In practice, coverage units require judgement and may change when expected service patterns change.

An onerous group has no positive CSM available to absorb losses. The loss component is recognised immediately in profit or loss. Subsequent favourable changes relating to future service may reverse previously recognised losses before establishing a new CSM, subject to the detailed requirements of the standard.

6. Presentation and disclosure

IFRS 17 separates insurance service results from insurance finance income or expenses. Insurance revenue reflects services provided rather than simply premiums billed. It excludes amounts that represent deposits or investment components that are not insurance services.

The statement of financial position presents insurance contract assets and liabilities separately from reinsurance contract assets and liabilities. Groups of contracts are generally aggregated when presented, but an asset group cannot be offset against a liability group merely because both arise from insurance activities.

Disclosures are intended to enable users to evaluate:

• the effect of insurance contracts on financial position, performance and cash flows;
• significant judgements and changes in those judgements; and
• the nature and extent of risks arising from insurance contracts.

Important disclosures include reconciliations of opening and closing balances, movements in fulfilment cash flows and CSM, methods and inputs used, discount rates, risk adjustment techniques, confidence-level equivalents and sensitivity information. The objective is not disclosure volume alone; it is decision-useful explanation of uncertainty, profitability and risk.

7. Interaction with IFRS 9 and local GAAP

7.1 IFRS 9

IFRS 9 governs financial assets and financial liabilities, while IFRS 17 governs insurance contracts. An insurer may therefore measure its insurance liabilities under IFRS 17 and its investment portfolio under IFRS 9. This creates potential accounting mismatches because changes in asset values may be recognised in profit or loss or other comprehensive income differently from changes in insurance liabilities.

Insurers must classify financial assets under IFRS 9 according to their contractual cash-flow characteristics and business model. Categories include amortised cost, fair value through other comprehensive income and fair value through profit or loss. The interaction with IFRS 17 requires careful analysis of asset-liability management, investment strategy and presentation choices.

IFRS 17 permits accounting policy choices concerning the presentation of insurance finance income or expenses in profit or loss versus other comprehensive income in specified circumstances. The choice should reduce accounting mismatches while remaining faithful to the economics of the business.

7.2 Local GAAP and regulatory reporting

IFRS 17 financial statements may coexist with local statutory accounts, tax accounts and prudential returns. These bases can differ in contract boundaries, discount rates, expense treatment, reserving margins, recognition of profit and treatment of reinsurance.

A reconciliation framework is therefore essential. Differences should be documented at the level of definitions, measurement, presentation and disclosure. An insurer must not assume that IFRS 17 liabilities are identical to regulatory technical provisions or solvency liabilities.

For example, a solvency regime may include prescribed stresses, capital add-ons or prudent margins designed to protect policyholders, whereas IFRS 17 aims to provide a current measurement and faithful representation for general-purpose financial reporting. The two systems may use related data but have different objectives.

8. Worked application: a short-term motor portfolio

Consider an illustrative annual group of motor policies measured under the PAA. Premiums received are 10,000 monetary units. Directly attributable acquisition cash flows are 600. The group provides coverage for one year. At reporting date, claims have been incurred with expected future payments of 2,400, and the risk adjustment for non-financial risk is 180. Discounting is assumed immaterial because payments are expected within a short period.

At initial recognition, the liability for remaining coverage is broadly based on premiums less acquisition cash flows:

The liability for incurred claims is:

The figures do not represent profit. The remaining coverage liability is released as coverage is provided, while the incurred-claims liability represents obligations for insured events that have already occurred. If claims subsequently increase to 2,650, the additional 250 is recognised as an adjustment to the liability for incurred claims and generally affects the insurance service result, subject to the applicable requirements.

This example illustrates why the PAA is simpler than the general model but is not equivalent to recognising premium revenue when cash is received and claims when paid. It retains an accrual-based measurement of insurance service obligations.

9. Applied case: implementation at Meridian Assurance

Background

Meridian Assurance, a fictional composite insurer, sells motor, household, term-life and participating savings products. Before IFRS 17, finance, actuarial and investment teams used separate models. Profit was reported mainly by written premium and claims incurred, while product profitability was difficult to compare across issue years.

Problem

The insurer faced four problems: inconsistent contract boundaries, insufficient historical data for transition, unclear allocation of acquisition costs, and potential mismatches between IFRS 17 insurance finance results and IFRS 9 investment results.

Analysis

The implementation team established portfolios based on similar risks and management practices. It then created annual cohorts and profitability groups. Motor and household contracts were assessed for the PAA. Term-life products were generally measured under the general model. Participating savings products were examined for eligibility under the variable fee approach.

Actuaries developed cash-flow models incorporating mortality, lapses, expenses and claims. Finance designed a CSM roll-forward linking opening balances, new business, assumption changes, finance effects and service release. Investment specialists analysed whether assets should be measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss under IFRS 9.

Approach and solution

Meridian introduced a controlled data dictionary defining contract, group, cohort, coverage unit, acquisition cost and risk-adjustment terms. It established model-validation procedures, independent review of assumptions and a change-control committee involving finance, actuarial, risk, investments, technology and internal audit.

The company also developed reconciliations between IFRS 17, local GAAP and solvency reporting. Management dashboards showed new-business CSM, CSM release, onerous contracts, claims experience, assumption changes and insurance finance results.

Outcome

The insurer identified that one apparently profitable product line contained an onerous annual cohort. It also found that investment accounting choices under IFRS 9 would materially affect reported volatility. Management responded by revising pricing governance, strengthening asset-liability management and improving product-level profitability analysis.

Learning points

The case demonstrates that IFRS 17 implementation is an enterprise transformation rather than a ledger conversion. The quality of grouping, data, assumptions, governance and communication determines whether the standard produces useful information.

10. Governance, judgement and professional ethics

IFRS 17 contains significant judgement. Examples include contract boundaries, grouping, discount rates, risk-adjustment methodology, coverage units, expense allocation, transition methods and the treatment of changes in assumptions.

Governance should ensure that assumptions are evidence-based, documented and independently challenged. Models should be validated for conceptual soundness, data quality, implementation accuracy and outcome performance. Override processes must be controlled because inappropriate overrides can shift profit between periods or conceal deteriorating cohorts.

Ethically, insurers must avoid using flexibility in IFRS 17 to create misleading performance narratives. Selective disclosure, optimistic lapse assumptions, unjustified diversification benefits or aggressive allocation of expenses can undermine faithful representation. Senior management and boards remain responsible for the integrity of reported information even when calculations are produced by sophisticated systems.

11. Technology, data and artificial intelligence

IFRS 17 implementation commonly requires integrated actuarial, finance and general-ledger systems. Important capabilities include contract-level data lineage, automated cohort assignment, version-controlled assumptions, reproducible calculations, audit trails and reconciliation controls.

Artificial intelligence may assist with claims classification, anomaly detection, document extraction and assumption monitoring. However, AI-generated outputs should not replace actuarial judgement or governance. A model used in financial reporting requires explainability, validation, controls against data drift and clear accountability. Historical claims data may contain bias, and an apparently accurate predictive model may produce inappropriate accounting outcomes if its purpose, training data or limitations are poorly understood.

12. Challenges and limitations

IFRS 17 improves comparability but does not eliminate judgement or complexity. Major challenges include:

• high implementation and ongoing data costs;
• scarcity of reliable historical information at transition;
• difficulty estimating long-term cash flows;
• volatility from economic assumptions and market movements;
• complexity of coverage-unit calculations;
• differences between accounting and solvency objectives; and
• difficulty explaining new performance measures to investors and policyholders.

The CSM may improve the depiction of unearned profit, but it is not a market value of the insurer, nor is it a complete measure of economic capital. Risk adjustment is entity-specific and therefore reduces, but does not eliminate, comparability. Similarly, the PAA reduces operational burden but may obscure detailed profitability patterns compared with a full model.

13. Contemporary developments and best practice

Current practice increasingly focuses on connecting IFRS 17 reporting with strategic pricing, capital allocation and performance management. Leading insurers are developing common data models across finance, actuarial and risk functions; using scenario analysis to assess interest-rate and lapse sensitivity; and reporting both accounting and economic measures with clear reconciliation.

Best practice includes:

1. Define portfolios and contract boundaries early and document the rationale.
2. Separate accounting policy decisions from system limitations.
3. Establish controlled assumption governance and independent model validation.
4. Reconcile IFRS 17 with IFRS 9, local GAAP and solvency reporting.
5. Test whether coverage units represent actual service provision.
6. Explain CSM movements and onerous groups in management reporting.
7. Maintain auditable data lineage from source systems to financial statements.
8. Use sensitivity and scenario analysis to communicate uncertainty.
9. Involve finance, actuarial, risk, investments, technology and audit functions.
10. Review disclosures for clarity rather than merely regulatory completeness.

Chapter Summary

IFRS 17 provides a comprehensive framework for recognising, measuring, presenting and disclosing insurance contracts. Its core measurement consists of expected discounted cash flows, an explicit risk adjustment for non-financial risk and a contractual service margin representing unearned profit. The general measurement model is the default, while the premium allocation approach provides a permitted simplification for eligible short-duration or immaterially different contracts. The variable fee approach addresses qualifying direct participating contracts.

Portfolio classification, annual cohorts and profitability groups determine how losses and profits are identified. The CSM defers profitable business and releases profit as insurance services are delivered through coverage units. Onerous groups generate immediate loss recognition. IFRS 17 must be implemented alongside IFRS 9, local GAAP and prudential reporting, with careful attention to accounting mismatches and differing objectives.

The standard requires extensive judgement, robust data and strong governance. Its success depends not only on technical compliance but also on transparent disclosures, model validation, ethical assumption-setting and integration of finance, actuarial, investment and risk functions.

Key Terms

Insurance contract: A contract in which the issuer accepts significant insurance risk from a policyholder.

Insurance risk: Risk other than financial risk transferred from the policyholder to the insurer.

Contract boundary: The point beyond which future cash flows are not included in the measurement of an existing contract.

Fulfilment cash flows: Present-value estimates of future cash flows plus the risk adjustment for non-financial risk.

Risk adjustment: Compensation required for bearing uncertainty arising from non-financial risk.

Contractual service margin: Unearned profit recognised as insurance services are provided.

General measurement model: The default IFRS 17 measurement model using the building blocks.

Premium allocation approach: A permitted simplified model for eligible groups of contracts.

Variable fee approach: A measurement approach for qualifying direct participating contracts.

Portfolio: Contracts subject to similar risks and managed together.

Annual cohort: A group containing contracts issued within a specified annual period.

Onerous group: A group expected to generate a net loss at initial recognition.

Coverage units: A measure of the quantity of insurance contract services provided.

Insurance service result: The result arising from insurance services, excluding insurance finance effects.

Insurance finance income or expenses: Changes arising from the time value of money, financial risk and related effects.

Contractual service margin release: Recognition of deferred profit as coverage and other services are provided.

IFRS 9: The IFRS standard governing financial instruments.

Local GAAP: Generally accepted accounting principles applicable in a particular jurisdiction.

Solvency reporting: Prudential reporting concerned with financial resilience and policyholder protection.

Data lineage: The traceable path from source data through models and calculations to reported results.

Review Questions

Short Answer Questions

1. What are the principal components of fulfilment cash flows?
2. Why does IFRS 17 require contracts to be divided into annual cohorts?
3. What does the contractual service margin represent?
4. State the principal eligibility conditions for the premium allocation approach.
5. How does IFRS 17 distinguish insurance service results from insurance finance income or expenses?

Long Answer Questions

1. Explain the general measurement model, including expected future cash flows, discounting, risk adjustment and CSM.
2. Compare the general measurement model, premium allocation approach and variable fee approach.
3. Discuss the significance of contract grouping for profit recognition and financial reporting.
4. Analyse the interaction between IFRS 17 and IFRS 9 in an insurer with a long-duration investment portfolio.
5. Evaluate the governance, ethical and data-management challenges involved in implementing IFRS 17.

Analytical / Application Questions

1. An insurer estimates expected future cash outflows of 7,800 and expected cash inflows of 9,000 for a group. The risk adjustment is 300 and initial acquisition cash flows are 400. Using a consistent convention, determine whether the group appears profitable at initial recognition and explain the treatment of the resulting CSM.
2. A portfolio contains three annual cohorts. The first is onerous, the second has no significant possibility of becoming onerous, and the third has uncertain profitability. Explain how the cohorts should be grouped and why combining them could distort reported performance.
3. An insurer reports substantial profit volatility after adopting IFRS 17 because its assets are measured through profit or loss while insurance finance effects are presented elsewhere. Analyse the possible sources of the mismatch and recommend governance or accounting-policy responses.

Multiple Choice Questions with Answers

Question 1

Which component represents unearned profit under IFRS 17?

A. Risk adjustment

B. Contractual service margin

C. Liability for incurred claims

D. Discount rate

Correct Answer: B. Contractual service margin

Question 2

Which risk is included in the IFRS 17 risk adjustment?

A. Equity-price risk

B. Foreign-exchange risk

C. Mortality risk

D. Interest-rate risk

Correct Answer: C. Mortality risk

Question 3

What is the default IFRS 17 measurement model?

A. Premium allocation approach

B. Variable fee approach

C. General measurement model

D. Amortised-cost model

Correct Answer: C. General measurement model

Question 4

A group has a CSM of 900 and expected coverage units of 30 in year one and 20 in year two. Assuming unchanged expectations, what is the year-one CSM release?

A. 180

B. 360

C. 540

D. 900

Correct Answer: C. 540

Question 5

Which condition supports use of the premium allocation approach?

A. The contract has no insurance risk

B. The coverage period of each contract is one year or less

C. The contract is always onerous

D. The underlying items are measured at fair value

Correct Answer: B. The coverage period of each contract is one year or less

Question 6

What is the purpose of annual cohorts?

A. To combine all contracts in an insurer

B. To prevent contracts issued more than one year apart being grouped together

C. To eliminate the risk adjustment

D. To replace contract-boundary analysis

Correct Answer: B. To prevent contracts issued more than one year apart being grouped together

Question 7

Which standard generally governs an insurer’s financial assets?

A. IFRS 9

B. IFRS 15

C. IAS 2

D. IAS 16

Correct Answer: A. IFRS 9

Question 8

What happens when a group is onerous at initial recognition?

A. The loss is deferred in the CSM

B. The loss is recognised immediately

C. The group is excluded from IFRS 17

D. The risk adjustment is eliminated

Correct Answer: B. The loss is recognised immediately

Question 9

Coverage units are primarily used to determine:

A. The insurer’s tax liability

B. The release of the CSM as services are provided

C. The IFRS 9 asset category

D. The legal contract boundary

Correct Answer: B. The release of the CSM as services are provided

Question 10

Which statement best describes local GAAP and solvency reporting?

A. They are always identical to IFRS 17

B. They have the same objective as general-purpose financial reporting

C. They may use related data but can have different objectives and measurements

D. They replace IFRS 17 for listed insurers

Correct Answer: C. They may use related data but can have different objectives and measurements