The list of FCFs that do not adjust the CSM

mearoramearora
in CIA.IFRS17-IC

'The list of FCFs that do not adjust the CSM:

Change in the time value of money and financial risks
Change in estimates of fulfilment cash flows in the liability for incurred claims
Experience adjustments on current period cash flows except those described above'

Could you please explain how?
1. "Change in present value of cash flows related to future coverage" will change the FCF and so adjust the CSM, but "change in time value of money" will not adjust CSM. Isn't this regarding discounting which is included in 'PV'?
2. Similarly, risk adjustment for financial risks are included in the 'PV of future cash flows',
so change in financial risk --> change in PV of future cash flows --> which according to text will adjust the CSM.

Comments

  • Staff-T1Staff-T1
    edited August 2022
    1. This is because any changes related to discounting assumptions will flow directly towards the insurance finance income/expense. You will see this in the IFRS17 discounting paper. Changes in FCF that affects future coverage and also the CSM would be a change in Ultimate LR assumption for example.
    2. I believe that any changes in the RA for financial risk is included in the insurance service result as per paragraph 17.81. You can also find this in the IFRS17 discounting paper.
  • mimilau5858mimilau5858

    Does "Change in the time value of money and financial risks" both flow into insurance finance expense?

  • Staff-T1Staff-T1

    Yes that is correct as long as the insurer does not select the OCI option

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