Insurance Contracts

Date recorded:

Policyholder participation rights

The staff presented a working draft of chapter 6 'Policyholder Participation' of the Discussion Paper.

The discussion focused on the question to what extent an insurer should classify the participating component of a participating contract as liability. The Board noted that the 'unitary view', which requires classifying the whole contract as a liability, is not an appropriate solution.

In previous meetings the Board had tentatively decided that an insurer should recognise a liability relating to expected dividends for participating policyholders if the insurer has an enforceable obligation. Economic compulsion was not considered to be sufficient to create an enforceable obligation. After a thorough discussion the Board came to the conclusion that a liability should be recognised when the insurer has a constructive obligation.

The staff was directed to further investigate this issue and to take into account the definition of a constructive obligation under both IFRSs and US GAAP.

Universal life contracts - discount rate(s)

The Board agreed that in measuring a universal life contract, each cash flow scenario should include interest credited at the rate that the insurer estimates will apply in the scenario, rather than the absolute minimum that can be contractually required.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.