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Separating components in Insurance contracts

Under IFRS 17, insurance contracts may contain different components that need to be separated and accounted for under other applicable IFRS standards. The standard requires insurers to separate and account for distinct components to ensure accurate financial reporting. These components are: 1. Embedded Derivatives If an insurance contract contains an embedded derivative that is not closely related to the host insurance contract, it must be separated and accounted for under IFRS 9 (Financial Instruments). 2. Investment Components An investment component is the amount an insurer is required to repay to a policyholder in all circumstances, regardless of whether an insured event occurs. If it is distinct (i.e. not highly interrelated with the insurance coverage), it must be separated and also accounted for under IFRS 9. If not distinct, it is included in the insurance contract measurement under IFRS 17. 3. Goods and Non-insurance Services If a contract includes a distinct service or good (e.g., roadside assistance or maintenance service), it must be separated and accounted for under IFRS 15 (Revenue from Contracts with Customers).