Section 4

AndrewLAndrewL
in CIA.IFRS17-1

Hello,

I noticed that the Wiki and Source Text for discrepancy between Insurance Revenue for reinsurance contracts issued are different.

Could you please explain each of the above reasons and those from the Wiki (Seasonality, reinstatement premium and Ceding commission on proportional reinsurance treaties) further?

Comments

  • Staff-T1Staff-T1
    edited July 2023

    Could you elaborate on which part specifically of the above that you do not understand? Also, both the screenshot you have provided above and the ones in the wiki are legitimate reasons why insurance revenue would differ for reinsurance contracts. I would lean towards the wiki as being more intuitive imo

  • AndrewLAndrewL
    edited September 2023

    Thanks for your response @Staff-T1.

    Could you please elaborate on how the above 3 points(As mentioned in the wiki) make the insurance revenue and EP different?

    Thanks,
    Andrew

  • Staff-T1Staff-T1

    The wiki is basically a restatement of the above, point 1 is seasonality, point 2 is the reinstatement premium and point 3 is the ceding commission

  • HateExams99HateExams99

    Hi, I'm having problems with understanding either the source text or the wiki answers.

    For example, how does point 2 (reinstatement premium) make insurance revenue for reinsurance contracts different from Earned Premium?

  • Staff-T1Staff-T1

    Under IFRS17, Revenue should be recognized as service is provided. For reinsurance contracts, especially for catastrophe coverages, the majority of service is provided during certain months of the year. For example, for hurricane XOL coverage, most of the service will be provided from May to October, which means most of the premium should be earned then. This leads to an uneven recognition of premium due to seasonality

    Reinstatement premiums are a premium you pay to the reinsurer to restore coverage, if your layer is exhausted from a covered event. These are cash flows that are contingent on the underlying contracts as whether the reinsurer receives bespoke cash flows depends on the claims from underlying contracts

    Ceding commissions are the amounts the reinsurer reimburses to the primary insurer due to not having to carry out the administrative duties related to servicing a contract. These are cash flows that are not contingent on any underlying contracts

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