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Accession #: 220103

 

Publication Date:
December 07, 2020
Title:
Revised Draft Educational Note – Assessing Eligibility for the Premium Allocation Approach Under IFRS 17 for Property & Casualty and Life & Health Insurance Contracts
Other Details:
28 pages.
Author:
Actuarial Guidance Council
Description:

The purpose of this draft educational note is to provide actuaries with practical application guidance on assessing whether a group of insurance contracts meets the required eligibility criteria for use of the premium allocation approach (PAA) to measure the liability for remaining coverage (LRC) under IFRS 17 Insurance Contracts (IFRS 17). This draft educational note is relevant to the IFRS 17 valuation of all insurance contract groups, including Property & Casualty (P&C) and Life & Health (L&H) groups potentially eligible for measurement under the PAA. 

The draft educational note is structured into eight sections, plus three appendices.  Section 1 introduces the option of measuring the liability for remaining coverage (LRC) using the PAA rather than the general measurement approach (GMA). Section 2 provides an overview of the three key criteria for eligibility of the PAA, which are discussed in detail in the next three sections:

  • Section 3: Determining whether the contracts in a group each have a coverage period of 12 months or less.
  • Section 4: Performing the assessment of “would not differ materially” for the LRC determined using the GMA and the PAA.
  • Section 5: Understanding the meaning of “significant variability in the fulfilment cash flows.”

The remaining sections address additional considerations relating to onerous contracts, reinsurance, and subsequent assessments of similar contracts in new groups. The appendices provide illustrative examples supporting the concepts discussed in Sections 4 and 5.

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