Contract boundary
In Section 1 of the wiki, it mentions:
LRC (Liabilities for Remaining Coverage) is an entity's obligation to:
(a) investigate & pay valid claims under existing insurance contracts for insured events that have not yet occurred
(b) pay amounts under existing insurance contracts that are not included in (a) and that relate to:
(i) insurance contract services not yet provided
(ii) any investment components or other amounts that are not related to the provision of insurance contract services and that have not been transferred to the liability for incurred claims
However in the IFRS17, it states that onerous contract is counted when they are signed not the effective date.
Could the section 1 in the wiki for part (b) (i), could it be talking bout the onerous contracts that are signed but the term has not started?
In Section 2 of the wiki we are given:
The contract boundary defines the cash flows that should be included when measuring the insurance liability arising from a contract.
→ the relevant cash flows are triggered by the contract during the term of the contract (Ex: 1 year)
→ the cash flows include premiums paid by the policyholder & payments from the insurer to the policyholder in accordance with the contract
So wouldn't this contradict the contact boundary? It sounds like the contract boundary is during the term, but LC (onerous contracts) needs to be accounted for as soon it's signed. This before the term.
Please advise.
Comments
For your first question, that interpretation is correct. I do not see any contradiction here. The contract boundary is the earlier of when the policy goes in force and when a contract is recognized as onerous, which could be the date of binding