IFRS 17-IFRS 9

All topics related to IFRS Standards.
Post Reply
mari
Posts: 4
Joined: 25 Jul 2019, 15:08

IFRS 17-IFRS 9

Post by mari »

Hi,

all our contracts are according to definition of Insurance contract -> insurance contracts. Just by one product there is no requirement, that the holder has to have ->the adversely affects the policyholder.

1 Question) Is there any option to apply for all our contracts still IFRS 17?


In 2005, the IASB amended the scope of IAS 39 to include financial guarantee contracts issued. However, if an issuer of financial guarantee contracts has previously asserted explicitly that it regards such contracts as insurance contracts and has used accounting applicable to insurance contracts, the issuer may elect to apply either IAS 39 or IFRS 4 to such financial guarantee contracts. [IFRS 4.4(d)]

something like this?

"An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder

B 13- IFRS 17
I am speeking about contracts, which require a payment if a specified uncertain future event occurs, but do not require an adverse effect on the policyholder as a precondition for the payment. This type of contract is not an insurance contract even if the holder uses it to mitigate an underlying risk exposure. It is more or lee weather index-> I read weather derivatives are under IFRS 9, could it be IFRS 15?

We make the payment, because we think that an adverse effect according to some figures has occured by the policyholder. We just do not check it, if it is so.

I know, i am little bit confused.

If someone can help me, i would be very happy and gratefull.
User avatar
Marek Muc
Site Admin
Posts: 3226
Joined: 15 Oct 2018, 17:21
Contact:

Re: IFRS 17-IFRS 9

Post by Marek Muc »

Hi, can you be more specific about the contracts themselves? do they cover a risk specific to the counterparty or a more general risk?
mari
Posts: 4
Joined: 25 Jul 2019, 15:08

Re: IFRS 17-IFRS 9

Post by mari »

Hi Marek,
I make an example:

If it will not enough rain in one region for a period of time, we will proof it with our tools and if the data meet the prescribed requirements. The policyholders from the region will receive money.

We assume that when our prescribed requirements occur, the policyholder should have damages. However, there is no proof of it and there is still possibility that thay do not have damages.

I thing it is one specific risk for the policyholder, but the process of the payment is that the all policyholders will receive money, if they are in the region.
User avatar
Marek Muc
Site Admin
Posts: 3226
Joined: 15 Oct 2018, 17:21
Contact:

Re: IFRS 17-IFRS 9

Post by Marek Muc »

I see. Important caveat first - I'm not an insurance expert :)

The most important factors to consider are:
1/ an adverse impact on the policyholder and
2/ whether the risk is specific to the counterparty

Who are policyholders? Are they in agricultural business? I don't think that there is a requirement that the issuer of the policy has to investigate the magnitude of actual impact.
In 2005, the IASB amended the scope of IAS 39 to include financial guarantee contracts issued.
These are not financial guarantee contracts! See the definition of a financial guarantee in IFRS 9.
I read weather derivatives are under IFRS 9
True, but when the underlying variable is not specific to the counterparty
mari
Posts: 4
Joined: 25 Jul 2019, 15:08

Re: IFRS 17-IFRS 9

Post by mari »

I thought also about these two points

The most important factors to consider are:
1/ an adverse impact on the policyholder and
IFRS 17 B-13
The definition of an insurance contract refers to an uncertain future event for which an adverse effect on the policyholder is a contractual precondition for payment. A contractual precondition does not require the entity to investigate whether the event actually caused an adverse effect, but it does permit the entity to deny the payment if it is not satisfied that the event did cause an adverse effect.

this could work for us

2/ whether the risk is specific to the counterparty

B26
Insurance contract
k) insurance swaps and other contracts that require a payment depending on changes in climatic, geological or other physical variables that are specific to a party to the contract.

Counter-argument

B27
(g) contracts that require a payment that depends on a climatic, geological or any other physical variable not specific to a party to the contract (commonly described as weather derivatives).

I think the question is, what is specific to the counterparty?

Who are policyholders? Are they in agricultural business?
Yes, there are in agricultural business.

Kind Regards
Mari
User avatar
Marek Muc
Site Admin
Posts: 3226
Joined: 15 Oct 2018, 17:21
Contact:

Re: IFRS 17-IFRS 9

Post by Marek Muc »

I think the question is, what is specific to the counterparty?
This is judgemental, as many aspects of IFRS application. If the policyholders are in agricultural business, and the insured risk relates to the amount of rainfall in the area where they operate - this is specific to them in my opinion
Post Reply