Page 81 - Continental Reinsurance 2022 Annual Report
P. 81
Statement of Significant Accounting Policies 79
Quoted Equity Securities 2022 Fair Value
Unquoted Equity Securities
421,395,000 2021
631,971,000
593,401,000
575,163,000
c IFRS 17 - Insurance contracts effective 1 January quarter 2022, activities were underway to consolidate
2023 and analyze the financial information gathered by the
IFRS 17 replaces IFRS 4 effective January 1, 2023. It Group and perform reviews and assessment of the
addresses changes in valuation and accounting for impact of application of IFRS 17 based on the various
insurance contracts. transition approaches. The Group determined the
IFRS 17 aims to set high quality and globally accepted transition approach is at a group of insurance contracts
financial reporting standards based on clearly outlined level, depending on availability of reasonable and
principles according to the International Accounting supportable historic information. The selected transition
Standards Board (IASB). It will make global insurance approach affects the measurement of the CSM on initial
reporting aligned and consistent. It also aims to apply adoption of IFRS 17:
uniform accounting standards for all types of insurance -Fully retrospective approach- the CSM is based on initial
contracts. assumptions when groups of contracts were incepted
IFRS 17 provides new basis for liability measurement and rolled forward to the date of transition as if IFRS 17
and profit recognition.The measurement models are; had always been applied.
i) Building Block Approach (BBA) measures the net -Modified retrospective approach-the CSM is calculated
inflow between the risk-adjusted present value of using modifications allowed by IFRS 17 taking into
expected inflows and outflows at inception. This account the actual pre-transition fulfilment cash flows;
method is applicable for measurement of long-term and and
whole life insurance and reinsurance contracts. -Fair value approach- the CSM at transition is calculated
ii) Premium Allocation Approach (PAA) This method is as the difference between the fair value of a group of
applicable for measurement of short term life, group life contracts, without the consideration of demand deposit
and general insurance. floor requirement, and the respective fulfilment cash
iii) Variable fee Approach (VFA) measures participating flows measured at the transition date.
business where policy holder liabilitiy is linked to The Group will apply a retrospective transition
underlying items. This method is applicable for approach whenever practical and expects that most
measurement of unit-linked contracts, deposit groups of insurance contracts will follow either full
administration contracts retrospective approach or modified retrospective
The Group will adopt IFRS 17 retrospectively and restate approach.
the comparative period of 2022. Adoption of IFRS 9 was The Group has assessed that the majority of its non-life
deferred and will be adopted with IFRS 17 effective reinsurance contracts issued, and reinsurance contracts
January 2023. The Group will apply the classification held in force as of transition date, will be eligible for the
overlay for selected asset portfolios backing direct application of the simplified approach and will apply the
participating insurance contracts which are accounted simplified approach for such contracts under IFRS 17.
for at amortized cost under the current accounting Due to their short-term nature such in-force contracts
framework but are expected to be accounted for at fair will typically use the fully retrospective transition
value with changes in fair value recorded in other approach. However, for contracts that have expired
comprehensive income (OCI) under IFRS 9. Expected prior to the transition date, for which no eligibility
credit loss requirements will not be adopted as part of assessment for the application of the simplified
the overlay approach. approach has been performed, the Group will
In order to adopt IFRS 17 and IFRS 9 in the consolidated applybuilding block approach with certain permissible
financial statements, a joint IFRS 17 and IFRS 9 Group transition modifications. The use of these modifications
Implementation Project (workstream) sponsored by the will result in the measurement of the liability for
Group Chief Financial Officer has been operating since incurred claims under modified retrospective or fair
2021. value approach using discountrates as at transition
To be able to present the comparative period date. As the Group already applies best-estimate
information according to IFRS 17, significant progress reserving under its current accounting policies, the
has been made in 2022 to ensure operational readiness implementation of IFRS 17 is not expected to have a
for the opening balance sheet reporting as of the major impact on non-life nominal reserves. The impact
transition date of January 1, 2022. During the third on shareholders' equity at transition is expected to result
