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IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017. [1] [2] It will replace IFRS 4 on accounting for insurance contracts and has an effective date of 1 January 2023. [3]
Most of the above examples concern reinsurance contracts (treaty contracts) that cover more than one policy. Reinsurance can also be purchased on a per policy basis, in which case it is known as facultative reinsurance. Facultative reinsurance can be written on either a proportional or excess of loss basis.
Generally, IFRS 4 permitted companies to continue previous accounting practices for insurance contracts, but did enhance the disclosure requirements. [3] IFRS 4 defines an insurance contract as a "contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event ...
Financial reinsurance is one means by which insurance companies can "smooth" their results. A pure 'fin re' contract for a non-life insurer tends to cover a multi-year period, during which the premium is held and invested by the reinsurer.
For example, Professor Lawrence A. Cunningham of George Washington University suggests adapting similar mechanisms to the risks that large auditing firms face in cases asserting massive securities law damages. [2] These agreements are usually documented as reinsurance contracts between the parties but can also be described as financial ...
[confusing] The nature and timing of reinsurance and other transactions can lead to the net premium written being negative, but this is likely to be temporary. Under accrual-basis accounting, only premiums pertaining to the relevant accounting period are recognized as revenues. These premiums are called net premiums earned.
Reinsurance sidecars, conventionally referred to as "sidecars", are financial structures that are created to allow investors to take on the risk and return of a group of insurance policies (a "book of business") written by an insurer or reinsurer (henceforth re/insurer) and earn the risk and return that arises from that business. A re/insurer ...
"Additional premium provision" means, in the context of finite risk insurance, a provision of an insurance or reinsurance contract that requires or strongly encourages the insured to pay the insurer some calculable amount as a result of losses paid or incurred under that insurance or reinsurance contract, excluding provisions for additional premium due to changes in exposure or policy audit.