IFRS 17: Presentations of revenue and income statement without premiums

IFRS 17: Presentations of revenue and income statement without premiums

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Speaker(s): Luca Bianchi (Aviva Italia Holding)

The current accounting rules in Life Insurance need to define premiums as revenues whose contribution to the profits depends on the actuarial valuation techniques accepted for defining technical provisions in the balance sheet. Local accounting rules are used to show premiums as revenues and to explain the profit and losses with the explicit contribution of premiums.

In contrast IFRS17 waives to defining revenues through the premiums and does not unveil premiums in the income statement. How profits and losses can then be justified without premiums? That's the question of several stakeholders and readers of the results of the underwriting activity of insurance. The paper focuses the attention on life insurance managed in the general model and explains how profit and losses can be shown without the need of premiums with also the help of some examples.

Moreover, it provides the mathematical proof that profits and losses shown with premiums - through a traditional scheme - and profits and losses shown without premiums - through the scheme proposed in IFRS17 - are equivalent. Revenues become linked to the contractual service margin (CSM), a new kind of technical provision which contributes significantly to profits and losses.

The paper shows the interaction between the CSM and the profits and losses via the revenues. The paper is targeted to actuaries working in life insurance who desire to help managers and board members to understand how the new kind of presentation of profits and losses and revenues make sense without the disclosure of premiums.

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