DOWNLOAD THE COMPLETE PROJECT

13 Users found this project useful

Effect of Insurance Contract Modification Rules on IFRS 17 Liability Values

Abstract

Insurance contract modifications occur when the terms and conditions of an existing insurance contract are changed after initial recognition. Under IFRS 17, the treatment of contract modifications can affect whether an existing contract is derecognised, adjusted, or combined with a new contract for measurement purposes. The rules applied to these modifications may therefore influence the measurement of insurance contract liabilities and the recognition of changes in the value of insurance obligations. This study will examine the effect of insurance contract modification rules on IFRS 17 liability values. It will assess how different modification treatments influence the measurement of insurance contract liabilities and determine the extent to which changes in contract terms affect reported liability values. The study will also examine how modifications involving coverage, premiums, benefits, contract boundaries, and other contractual terms may alter the valuation of insurance obligations. The study will focus on insurance contract modifications, IFRS 17, liability measurement, contract amendments, fulfilment cash flows, contractual service margin, insurance revenue, contract boundaries, derecognition, and insurance contract valuation. Actuarial valuation techniques and IFRS 17 measurement principles will be applied to assess the changes in liability values resulting from alternative contract modification scenarios. A quantitative research approach will be adopted for the study. Insurance contract data, modification records, premium information, expected claims, expenses, and other relevant valuation assumptions will be analysed using descriptive statistics, comparative analysis, actuarial calculations, sensitivity analysis, and scenario-based modelling. Alternative modification treatments will be applied to selected insurance contract scenarios to determine their effects on IFRS 17 liability values and related financial measurement outcomes. The study is expected to reveal that insurance contract modification rules may have a significant effect on IFRS 17 liability values. Different treatments of modified contracts may result in variations in fulfilment cash flows, contractual service margins, insurance liabilities, and the timing of profit recognition. The magnitude of the effect may depend on the nature of the modification, changes in expected cash flows, remaining coverage period, contractual service margin, and the measurement model applied. The study will be useful to actuaries, insurance companies, accountants, financial reporting specialists, valuation professionals, regulators, auditors, and researchers. It may provide useful information for understanding the valuation consequences of contract modifications, improving IFRS 17 implementation, strengthening liability measurement procedures, and promoting consistency in insurance financial reporting. The findings may also assist insurers in evaluating the financial effects of changes made to existing insurance contracts. The study concludes that insurance contract modification rules are important considerations in IFRS 17 liability measurement because changes in contractual terms and their accounting treatment can influence reported insurance liability values. It is therefore recommended that insurers establish consistent modification assessment procedures, maintain accurate records of contractual changes, and apply appropriate IFRS 17 measurement principles when determining the resulting liability values.

Keywords: Insurance contract modification, IFRS 17, liability values, contract amendments, insurance liabilities, fulfilment cash flows, contractual service margin, contract boundaries, derecognition, insurance contract measurement, actuarial valuation, insurance accounting, liability measurement, financial reporting, IFRS 17 compliance.