Reinsurance Contracts Held: An Example of Proportionate Reinsurance Coverage

By IFRS Foundation · 2018

Study guide: Exam 6I

An IFRS Foundation worked example of IFRS 17 applied to a group of insurance contracts and to reinsurance contracts held that cover them proportionately. Set out as 24 presentation slides with notes, it illustrates the requirements in IFRS 17 Insurance Contracts applied to a group of underlying insurance contracts and to a group of reinsurance contracts held that provides proportionate coverage for that group, and demonstrates that the measurement of a group of reinsurance contracts held is consistent with the measurement of any underlying insurance contracts, and that the timing of cash flows does not directly affect the recognition of reinsurance income or expenses.

On the syllabus

Exam 6I — objectives D4–D5; pp. 1–4.

Introduction

The example illustrates the requirements in IFRS 17 applied (a) to a group of underlying insurance contracts and (b) to a group of reinsurance contracts held that provides proportionate coverage for that group.
It demonstrates that the measurement of a group of reinsurance contracts held is consistent with the measurement of any underlying insurance contracts, and that the timing of cash flows does not directly affect the recognition of reinsurance income or expenses.

Reminder: IFRS 17 requirements

The cedant recognises, measures and presents separately its reinsurance contracts held (normally an asset) and its insurance contracts (normally a liability).
The notes refer to paragraphs 60–70 of IFRS 17 and paragraphs BC296–BC315 of its Basis for Conclusions.

Assumptions

IFRS 17 general model (not PAA); a risk adjustment for non-financial risk of nil; a discount rate of 0%.
Services are provided by the insurer evenly over the contract term for each contract, and all events occur as expected at initial recognition.
The notes state that the example demonstrates the mechanics of the requirements, is simplified, and is not intended to reflect a real fact pattern.

Group of underlying insurance contracts

Facts
Cash flows
Statement of financial position
Statement of profit or loss

Reinsurance contract held: timing of cash flows match timing of cash flows for the underlying insurance contracts

Facts
Cash flows
Statement of financial position
Statement of profit or loss
Statement of financial position: the whole picture
Statement of profit or loss: the whole picture

Reinsurance contract held: cash flows are settled net at the end of the coverage period

Cash flows
Statement of financial position
Statement of profit or loss
Statement of financial position: the whole picture
Statement of profit or loss: the whole picture

In practice

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Sources

Reinsurance contracts held: an example of proportionate reinsurance coverage (IFRS Foundation) — the document (sha256 2464eb9bfd27005e…): the title slide, the slide titles and section-divider slides (read from page images, as seven pages have no text layer), and the text and notes of slides 2–4 for the lead and the first three divisions; it prints no date
IFRS 17 implementation: new support materials on reinsurance contracts held now available (IFRS Foundation, 13 July 2018) — the publisher's announcement of the example with the pocket guide, which gives the year
CAS Exam 6I Content Outline, Fall 2026 — the citation and the assigned pages (pp. 1–4)