International Financial Reporting Standard (IFRS) 17 Insurance Contracts: The Moody’s Analytics suite of software solutions, models, content, and services helps support the new requirements of IFRS 17 Insurance Contracts.
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Developing credit and illiquidity assumptions for IFRS 17 discounting using a cost of capital approach
Incorporating negative interest rates and absolute volatilities into market-consistent yield curve models and calibrations
In his IFRS17 Insight whitepaper, Nick Jessop – Senior Director Research, decodes the impact, significance and use of discount curves in the IFRS 17 reporting process.
This research paper discusses the credit risk premium adjustment required for constructing discount rates specified by the IFRS 17 accounting rules. Calculating the credit risk premium is a key requirement in the ‘top down' yield curve method. It may also be a useful input in computing (or benchmarking) the illiquidity premium for ‘bottom up' discount rate construction.
In this paper, we look at the changes that have occurred in interest rate markets since the financial crisis. We consider how insurers can address the challenge of low and (more recently) negative yield curves as central banks have responded to challenging economic conditions with a range of unconventional monetary policies.