CERTYNEX IFRS ACADEMY

A reinsurance contract held, entered into before the underlying contracts were recognised, covers proportionally an onerous underlying group. What does the loss-recovery component introduced by the June 2020 amendments provide for?

The expected recovery is recognised after the claims of the onerous underlying group are paid, at the actual settlement date of each claim.

The loss of the underlying group is cancelled, the reinsurer bearing the risk of that group in place of the cedant for all future claims of the group.

The margin of the reinsurance contract is adjusted and a loss-recovery component recognises the expected recovery with the loss.

The reinsurance contract is itself onerous and its loss is recognised in place of that of the underlying group.