The International Financial Reporting Standard (IFRS) 17 risk adjustment is an influential factor in the pricing of insurance contracts and in how profit from insurance contracts is reported and emerges over time. While the risk adjustment must satisfy certain conditions, the method for its calculation is not prescribed and is the insurer’s choice. As such, there are many possible calculation methods.
This paper is the third in a series designed to provide an introduction to different features of the risk adjustment that should be considered before implementation. The paper opens with a simple case study to illustrate the methods described in the subsequent sections and concludes with a summary, including issues to consider.
Read “Equivalent Confidence Level for the IFRS 17 Risk Adjustment: Risk Adjustment for Non-Financial Risk” to learn more.