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28 September 2022 (updated 21 March 2024)

In practice, companies may acquire rather than issue an insurance contract – i.e. they might acquire the contractual rights and obligations of previously issued insurance contracts from another company. IFRS 17 Insurance Contracts changes the accounting for these insurance contracts, whether they are acquired via a transfer, via a business combination in the scope of IFRS 3 Business Combinations or under common control.

What's the issue?

Under IFRS 17, a company now needs to assess all insurance contracts acquired as at their date of acquisition, not their date of inception (or previous modification).

What's the impact?

A company may need to account for insurance contracts with similar characteristics differently. This is because it needs to assess them at different dates depending on whether they are acquired or issued. 

An acquired contract may also no longer be in the scope of IFRS 17 and may need to be accounted for under another accounting standard – e.g. IFRS 9 Financial Instruments.

If a company acquires contracts through acquiring a contract-issuing subsidiary, then it reassesses the acquired contracts as at the date of acquisition. Consequently, measurement differences between the parent and subsidiary may arise and cause a dual contractual service margin (CSM).

What's next?

  • Identify all relevant data related to recent and planned acquisitions and assess the information you have available.
  • Assess your systems and processes to ensure they can support the accounting requirements.
  • Educate stakeholders on the financial impacts when preparing for recent and future transfers of insurance contracts or business combinations.
  • Involve specialists: transfers of insurance contracts or business combinations are often unique and complex.

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