Loss-recovery on reinsurance

Learning objectives

• Explain that the loss on onerous underlying contracts is offset at the same time by an expected recovery under the reinsurance contract.L3
• Analyse the effect of a reinsurance treaty held on the loss of an onerous underlying group.L4

Normative references

• IFRS 17 §66AWhen the entity recognises a loss on an onerous group of underlying contracts, on initial recognition or when onerous contracts are added, it adjusts the margin of the group of reinsurance contracts held and recognises income (paras. B119C to B119E); the loss-recovery component is dealt with in para. 66B (2020 amendments).
• IFRS 17 §B119CPara. 66A applies only if the reinsurance contract held is entered into before or at the same time as the onerous underlying contracts are recognised; the Standard sets no proportionate coverage condition.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• 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?L3