Actuarial Notes

Good General Insurance (International) Limited: Selected illustrative disclosures for IFRS 17 Insurance Contracts (Premium allocation approach), IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures

By EY · EYGM Limited · 2020 · EYG No. 007724-20Gbl

Study guide: Exam 6I

EY's illustrative disclosures meeting the requirements of IFRS 17 and IFRS 9 for groups of insurance contracts accounted for under the premium allocation approach (PAA). They are presented as extracts from the full financial statements of Good General Insurance (International) Limited, a fictitious non-life insurer in the fictitious country of Euroland, for the year ended 31 December 2023, with commentary explaining how the requirements of IFRS have been implemented; the figures come from a model of hypothetical transactions.

On the syllabus

  • Exam 6I — objectives C2–C3, D4–D5; the Introduction, Note 6 (Insurance service expense) and Note 11 (Insurance and reinsurance contracts), as archived on the CAS website

Abbreviations and key

Introduction

  • The publication is not a full set of illustrative financial statements: it focuses on the new presentation and disclosure requirements of IFRS 17 and IFRS 9 for a non-life entity applying the PAA, which Good General adopted for the annual period commencing 1 January 2023.
  • Good General disaggregates its insurance disclosures by four major product lines: personal accident insurance, marine insurance, property insurance and liability reinsurance assumed (on a quota share basis, treaty and facultative).
  • The disclosures in Note 11, the roll-forward of the net asset or liability for insurance and reinsurance contracts, require significantly more information than is currently presented and are expected to be one of the areas requiring most effort from preparers.
  • The standards applied are those in issue at 30 June 2020, including the final amendments to IFRS 17 issued 25 June 2020.
  • The preparation approach
    • The model includes onerous and non-onerous groups, some in a foreign currency, quota share reinsurance held on marine business with a loss-recovery component on reinsured onerous contracts, profit commission on liability reinsurance treated as a non-distinct investment component, and assets for insurance acquisition cash flows.
    • Insurance finance income and expense is disaggregated between profit or loss and OCI for personal accident insurance only (IFRS 17.88).
  • Key new disclosures since February 2019 publication
    • The update for the June 2020 amendments adds the accounting for assets for insurance acquisition cash flows and for a loss-recovery component on initial recognition of an onerous group of underlying contracts.

Statement of profit or loss and other comprehensive income

Statement of financial position

Statement of changes in equity

Statement of Cash flows

Scope of the publication

Notes to the financial statements

  • 1 Changes in accounting policies and disclosures
    • 1.1 New and amended standards and interpretations
  • 2 Summary of significant accounting policies
    • 2.1 Insurance and reinsurance contracts classification
    • 2.2 Insurance and reinsurance contracts accounting treatment
    • 2.3 Financial assets
    • 2.4 Recognition of interest income
  • 3 Insurance and financial risk
    • 3.1 Insurance risk
    • 3.2 Financial risk
  • 4 Capital
    • 4.1 Capital management objectives, policies and approach
  • 5 Significant judgements and estimates
    • 5.1 Insurance and reinsurance contracts
    • 5.2 Financial assets
  • 6 Insurance service expense
    • The breakdown of insurance service expenses by major product line for 2023: incurred claims and other expenses, amortisation of insurance acquisition cash flows, losses on onerous contracts and reversals of those losses, changes to liabilities for incurred claims, impairment and reversal of impairment of assets for insurance acquisition cash flows, and insurance acquisition cash flows recognised when incurred.
  • 7 Total investment income and net insurance financial result
  • 8 Equity and debt instruments at fair value through profit or loss
  • 9 Debt instruments measured at fair value through other comprehensive income
  • 10 Debt instruments measured at amortised cost
  • 11 Insurance and reinsurance contracts
    • The breakdown of groups of insurance contracts issued and reinsurance contracts held in an asset position and in a liability position, by product line, for 2023 and 2022.
    • 11.1 Roll-forward of net asset or liability for insurance contracts issued showing the liability for remaining coverage and the liability for incurred claims
      • Disclosure is disaggregated by major product line, based on how the company is managed; the commentary notes that IFRS 17.95–96 require judgement on aggregation, by type of contract, geographical area or reportable segment.
      • 11.1.1 Personal accident insurance
      • 11.1.2 Marine insurance
      • 11.1.3 Property insurance
      • 11.1.4 Liability reinsurance issued
      • The roll-forwards show the liability for remaining coverage (excluding the loss component, and the loss component), the liability for incurred claims (estimates of the present value of future cash flows, and the risk adjustment) and assets for insurance acquisition cash flows; the expected timing of derecognition of assets for insurance acquisition cash flows is also disclosed in time bands.
    • 11.2 Roll-forward of net asset or liability for reinsurance contracts held showing the assets for remaining coverage and the amounts recoverable on incurred claims
      • 11.2.1 Marine insurance
      • The roll-forward has no loss component column, since reinsurance contracts held cannot be onerous, but includes a loss-recovery component column for amounts recognised where reinsurance covers onerous underlying contracts.

Appendix 1 - Scope of the Publication

  • A summary of the disclosures required by IFRS 17, and of the new and extended disclosures required by IFRS 7 on the adoption of IFRS 9, covered in the publication.

Related readings

  • Applying IFRS 17 (EY - 2021) — EY's guide to IFRS 17, to which the Introduction refers readers for further commentary on the standard

Sources

  • Good General Insurance (International) Limited: Selected illustrative disclosures (EY) — the document: title page, the contents and the notes' own contents list (headings and numbering), the text of the Introduction, Note 6 and Note 11, the Appendix 1 heading, and the imprint (© 2020 EYGM Limited, EYG No. 007724-20Gbl) (sha256 103402fa215f7a3c…); the publication credits no author, and notes outside the assigned ones are headings only
  • CAS Exam 6I Content Outline, Fall 2026 — the citation (titled there "Illustrative disclosures to meet requirements of IFRS 17 and IFRS 9 for groups of insurance contracts accounted for under the PAA in IFRS 17," 2020), the note to use the paper archived on the CAS website, and the assignment (objectives C2–C3 and D4–D5; the Introduction, Note 6 and Note 11)