Actuarial Notes

IFRS 17 Expenses

By Committee on Life Insurance Financial Reporting and Committee on Property and Casualty Insurance Financial Reporting, Canadian Institute of Actuaries · Canadian Institute of Actuaries · 2024 · 224129

Study guide: Exam GH-201C

A CIA explanatory report, dated December 17, 2024 (document 224129), that provides information concerning expenses under IFRS 17 requirements. Prepared by the Committee on Life Insurance Financial Reporting and the Committee on Property and Casualty Insurance Financial Reporting, it compares IFRS 4 with IFRS 17 on expenses, sets out considerations on directly attributable expenses, classifies grey-area expenses, and suggests disclosures for the Appointed Actuary's report; its appendices cover other expense types and the conduct of an expense study.

On the syllabus

  • Exam GH-201C — Financial Statements, outcomes 2e and 2f; the December 2024 report.

Preamble

  • Process
  • Your feedback

1 Introduction

2 Comparison between IFRS 4 and IFRS 17

  • 2.1 Current practice: Life and health
  • 2.2 Current practice: Property and casualty
  • 2.3 Comparison between IFRS 17 and IFRS 4

3 General considerations

  • 3.1 Directly attributable expenses
    • 3.1.1 General measurement approach and variable fee approach
    • 3.1.2 Premium allocation approach
    • 3.1.3 Liabilities for incurred claims
  • 3.2 Measurement and presentation
    • 3.2.1 Contracts measured using the GMA
    • 3.2.2 Contracts measured using the PAA

4 Expense classification considerations – directly vs. non-directly attributable expenses

  • 4.1 Examples of expenses that would generally be considered directly attributable
  • 4.2 Examples of grey areas that could be considered either directly or not directly attributable expenses
    • 4.2.1 Investment expenses
    • 4.2.2 Corporate governance, regulatory/statutory reporting and shareholder-related expense
    • 4.2.3 Generic marketing, sales conference, and events

5 Other expense related topics

  • 5.1 Reinsurance contract held expenses
  • 5.2 Productivity and economies of scale
  • 5.3 Abnormal costs used to fulfil the contracts
  • 5.4 Systematic and rational allocations of expenses
  • 5.5 Frequency to review directly vs. non directly attributable expense
  • 5.6 Premium taxes
  • 5.7 Expense study

6 Suggested disclosures in the Appointed Actuary's Report

Appendix 1 – Liability for remaining coverage at initial and subsequent measurement under the premium allocation approach

Appendix 2 – Other expense types

  • 1 Future directly attributable maintenance expense cash flows associated with LIC
  • 2 Expenses payable to the purchaser of an insurance contract
  • 3 Variable commissions payable to brokers and agents
  • 4 Other insurance service expenses payable to intermediaries

Appendix 3 – Conducting an expense study

  • 1 Scope of expense study
  • 2 Collecting the expense data
  • 3 Reconciliation of expense data
  • 4 Expenses included/excluded from the valuation
  • 5 Categorization of Expenses
  • 6 Unit Measurements
  • 7 Classification of Expenses
  • 8 Allocation of Expenses
  • 9 Unit Expenses
  • 10 Testing and Reconciliation

Sources