Financial, Non-Financial Risk, Component of Insurance Contract

AndrewLAndrewL
in CIA.IFRS17

Hello, could you please help me clarify the following:

  1. What exactly is Financial and Non-Financial Risk

  2. An Insurance Contract can be broken down into 4 components; Insurance, Service, Investment and Embedded Derivatives.

  • In Section 5, we talk about Financing Component. Is that the same as Investment Component?
  • Wiki states that Insurance component("Non Financial Risk"). Are these two terms interchangeable?

Comments

  • Staff-T1Staff-T1

    1) Financial Risk: Risk stemming from change in financial variables that can affect the value of the insurance contract liabilities and includes interest rate risk, currency risk, foreign exchange risk, equity risk etc
    Non-Financial Risk: Risk stemming from changes in non-financial variables that can affect the value of the insurance contract liabilities and include reserving risk, underwriting risk, etc.

    2) Financing component is the accrued interest from the prepayment of premium.
    Investment component is the amount that the insurer is guaranteed to pay back the policyholder regardless of whether an insured event happens or not.

    No. Non-financial risk is a part of the insurance component but not everything

Sign In or Register to comment.