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Effect of Insurance Acquisition Cash Flows on IFRS 17 Contract Measurement

Abstract

Insurance acquisition cash flows represent costs and other cash flows associated with obtaining insurance contracts, including activities related to selling, underwriting, and initiating insurance business. Under IFRS 17, the treatment of these cash flows forms part of the measurement process for insurance contracts and can influence the amounts recognized in insurance contract assets or liabilities. Proper assessment of acquisition cash flows is therefore important for accurate measurement and financial reporting. This study will examine the effect of insurance acquisition cash flows on IFRS 17 contract measurement. It will assess how variations in acquisition-related cash flows influence the measurement of insurance contracts and determine their effects on the amounts recognized under the applicable IFRS 17 measurement requirements. The study will focus on insurance acquisition cash flows, IFRS 17 contract measurement, fulfilment cash flows, contractual service margin, insurance contract liabilities, acquisition expenses, premium cash flows, claims, discount rates, and risk adjustment. Relevant IFRS 17 measurement principles and actuarial valuation techniques will be applied to assess how different levels and patterns of acquisition cash flows influence contract measurement. Alternative acquisition cost scenarios will be considered to examine their implications for insurance contract values. A quantitative research approach will be adopted for the study. Relevant insurance contract data, acquisition cash flows, projected premiums, claims, expenses, contract boundaries, discount rates, risk adjustments, and contractual service margin information will be analysed using IFRS 17 measurement techniques, present value calculations, actuarial modelling, sensitivity analysis, and scenario analysis. Alternative acquisition cash flow assumptions will be applied to determine their effects on measured insurance contract balances. The study is expected to reveal that changes in insurance acquisition cash flows may have a significant effect on IFRS 17 contract measurement. Higher acquisition cash flows may increase the amount of cash flow included in the measurement of relevant insurance contracts and influence the resulting insurance contract assets or liabilities. The magnitude of the effect may depend on the timing and amount of acquisition cash flows, contract duration, premium patterns, discount rates, and other IFRS 17 measurement assumptions. The study will be useful to insurance companies, actuaries, accountants, financial reporting professionals, regulators, auditors, risk managers, and researchers. It may provide useful information for improving the measurement and reporting of insurance contracts under IFRS 17, evaluating acquisition-related cash flows, assessing contract profitability, and supporting accurate financial statement preparation. The study concludes that insurance acquisition cash flows are important considerations in IFRS 17 contract measurement because their amount and timing can affect the measurement of insurance contracts and related financial reporting outcomes. It is therefore recommended that insurers maintain accurate acquisition cash flow records and apply appropriate IFRS 17 measurement procedures and actuarial techniques when determining insurance contract balances.

Keywords: Insurance acquisition cash flows, IFRS 17, contract measurement, insurance contracts, fulfilment cash flows, contractual service margin, insurance liabilities, acquisition expenses, premium cash flows, claims, discount rates, risk adjustment, actuarial valuation, insurance accounting, financial reporting.