Components of Insurance Contract

slocksonslockson
in CIA.IFRS17

Hi Graham,

Based on the readings, we are given that an insurance contract has 4 components:

  • Insurance contract = Insurance component + Service Component + Investment Component + Embedded Derivatives.

We are also given that:

  • Insurance Contract Liability = LIC + LRC

I was wondering if there was any connection between these 2 formulas? Does Insurance Contract Liability represent Insurance Component + Service Component?

Thank you

Comments

  • grahamgraham

    My reading of the text is that the second formula, Insurance Contract Liability, would include the 4 components given your first formula. In other words, if you are valuing the total insurance contract liability, you may need to separate the calculation into as many as 4 pieces, as appropriate, and then calculate LIC and LRC for each of the 4 components. (But I'm not exactly sure what the actual calculation would look like in practice since there aren't any examples in the source text.)

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