1. Insurance IFRS Seminar December 2, 2016 Chris Hancorn Session 31
OCI workshop
Insurance IFRS Seminar
December 2, 2016
Chris Hancorn
Session 31

2. Example 5 year single premium endowment contract
10,000 initial premium
11,000 paid at end of year 5
Risk margin = 0
Assume contractual service margin is not unlocked and runs off with the passage of time
Assume the deposit element is not unbundled
The discount rate is flat and initially 2.5%
Besides the endowment amount, there are some insurance claims sufficient to classify it as insurance with expected values listed in the following table:
Other relevant cash flows (like commissions) are also listed in the spreadsheet
Year 1 2 3 4 5
Claim 10 15 25 40 50

3. Example (cont’d) 5 year single premium endowment contract
The projected discount rate changes each year according to the table below
In year 2, actual claims double but weren’t anticipated before it happened
Based the revised interest rates, persistency on year 3 and later change and increase claims by 30 for all years.
For years 1 and 2, what is the insurance reserve and how much of the reserve flows through OCI?
End of year
Level discount rate
At issue
2.5% 1
2.0% 2

4. Thank You