IFRS Contract Boundary Different from Policy Term under current practice
IFRS17 requires that reinsurance contracts held to be measured as a separate contracts, so how does contract boundary different from the policy term?
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IFRS17 requires that reinsurance contracts held to be measured as a separate contracts, so how does contract boundary different from the policy term?
Comments
Not sure how the first part relates to the second part of your question here, but a contract boundary differs from the policy term because there could be certain clauses that "force" renewal or limit the ability of the insurer to reprice the risk. For example, having a policy that guarantees the insured will be able to renew at the same rate during the next year will extend the contract boundary beyond the policy term
in the battle cards,
identify examples where IFRS contract boundary may be different from policy term under current practice
cancellable contracts:
- under IFRS 17: contract boundary = cancel date
(under current practice, policy term extends beyond cancel date if that would increase the liability)
title insurance: (covers defects in the title to land or buildings)
- under IFRS 17: contract boundary = period of ownership of land/building (coverage is triggered by discovery of defect)
(under current practice, policy term = term of contract since coverage is triggered by the defect itself, not its discovery)
onerous contracts:
- IFRS 17 must recognize liability of an onerous contract when signed
(under current practice the entity can wait until effective date to recognize liabilities)
**_reinsurance held:
- IFRS 17 requires reinsurance contracts held to be measured as separate contracts
(current practice determines policy term for underlying direct contract only)_**
Is current practice in this battle card referring to pre IFRS 17?
no it is referring to IFRS17
Thanks for the clarification