Acquisition Cashflow and CSM

a225khana225khan
in CIA.IFRS17-IC

  1. Can you please explain what “assets are recognized over time as insurance contracts are recognized” means?

  1. Can you please explain what this means: “CSM is unearned profit the entity will recognize as it provides services under the insurance contract”.

Comments

  • Staff-T1Staff-T1
    edited September 2022
    1. For Deferred Acquisition expenses, you can choose to not recognize them at once. For example: If you have acquisition expenses of 100, you can recognize 25 every quarter.
    2. If an insurance contract is profitable, we expect the PV of cashflows going in to be higher than the PV of cashflows going out. This difference is the unearned profit. Instead of recognizing it immediately, we only recognize this profit as insurance services are provided
  • bicbicbicbic

    For acquisition cashflow, it says "If a payment is contingent on persistency within a contract boundary, it will generally be considered an administration cost."

    Does it mean all the costs related to renewal business is considered as administration cost rather than acquisition costs?

    Thanks

  • Staff-T1Staff-T1

    Renewal business would be on a different cohort and is outside the contract boundary of your current cohort. I believe costs associated with renewal business is an acquisition cost

  • bicbicbicbic

    "If a payment is contingent on persistency within a contract boundary, it will generally be considered an administration cost."
    Could you give an example of the payment mentioned above?

    Thanks,

  • Staff-T1Staff-T1

    Off the top of my head, probably some expenses related to mid term cancellations? Not 100% sure tbh

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