Internal:Training/IFRS17

🎯 Introduction. This training programme takes you from first principles to a complete understanding of IFRS 17, the international accounting standard for insurance contracts. Each page builds on the last, starting from the most basic notions and adding complexity one step at a time. No prior knowledge of insurance or accounting is assumed. By the end, you will be able to read, interpret, and work with IFRS 17 financial statements with confidence.

Why insurance exists

• Uncertainty and risk
• Pooling as a solution
• The role of the insurer

The economics of an insurance contract

• Anatomy of a premium
• The timing mismatch and the time value of money
• Where profit comes from

What is accounting and why it matters

• The purpose of accounting: who needs it and why
• The balance sheet and the income statement
• Key principles: recognition, measurement, and matching

Accounting for an insurer

• The insurer's balance sheet: reserves as the dominant liability
• The insurer's income statement: premiums, claims, and expenses
• The hard questions: when is revenue earned, how do you value an uncertain promise?

Why insurance broke global standards

• Different countries, different answers
• IFRS and the promise of one global language
• IFRS 4 as a temporary compromise and why IFRS 17 was needed

The building blocks: overview

• The idea of decomposing a liability into transparent pieces
• The four components at a glance: FCF, discounting, RA, CSM
• How the building blocks solve the problems of the old world

Fulfilment cash flows

• Which cash flows to include
• The contract boundary
• Probability-weighted estimates and keeping assumptions current

Discounting

• Why discounting is essential for insurance liabilities
• Choosing the discount rate: top-down vs. bottom-up
• How discounting affects the liability over time

The risk adjustment

• What the risk adjustment represents
• How to measure it: confidence levels, cost of capital, VaR
• How the risk adjustment releases as risk expires

The contractual service margin

• What the CSM represents: unearned profit locked away on day one
• How the CSM absorbs changes in estimates
• How the CSM releases into revenue: coverage units

Grouping contracts

• Portfolios: contracts with similar risks
• Profitability groups: separating profitable from onerous
• Annual cohorts: why contracts issued more than a year apart must be separated

The general model: initial recognition

• Day one: measuring the four building blocks
• Profitable contracts: CSM is positive
• Onerous contracts: CSM is zero, loss recognized immediately

The general model: subsequent measurement

• Passage of time: unwinding discount, releasing RA, releasing CSM
• Changes in estimates: future service adjusts CSM, current/past service hits P&L
• Claims incurred, settled, and derecognition

The income statement under IFRS 17

• Insurance revenue: not premiums, but service delivered
• Insurance service expenses and the insurance service result
• Insurance finance income/expense and the OCI option

The premium allocation approach

• When PAA is available: the eligibility test
• How PAA works: simplified measurement
• What you keep and what you skip vs. the general model

The variable fee approach

• What are direct participating contracts
• The variable fee concept: how VFA modifies the general model
• Scope and the three eligibility criteria

Reinsurance held

• Reinsurance as the mirror image: the insurer is the customer
• Key asymmetries: day-one gains and loss recovery
• Proportionate vs. non-proportionate reinsurance

Contract modifications and portfolio transfers

• When contract terms change: derecognize or continue?
• The criteria and consequences of modification
• Portfolio transfers: measuring at the transaction date

Transition to IFRS 17

• The full retrospective approach: the gold standard
• The modified retrospective approach: practical approximation
• The fair value approach: when history is unavailable

Presentation, disclosure, and interpretation

• How IFRS 17 numbers appear in published financial statements
• Key disclosure requirements
• Reading IFRS 17 reports as an analyst or stakeholder