ECIC IR 2023

ANNUAL Financial Statements for the year ended 31 March 2023

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D

H

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2

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1

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E X P O R T C R E

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O C

A S

C

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F

T

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I

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U

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O

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A

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Accounting Policies

not easily tradable or convertible into cash at short notice). In the context of IFRS 17, the illiquidity premium may be relevant for insurance contracts with cash flows related to illiquid contract characteristics. To incorporate the fact that different insurance contracts have different illiquidity characteristics, the contracts are categorised into illiquidity buckets. Then an application ratio is applied to the illiquidity premium for each illiquidity bucket. Subsequent measurement The carrying amount of a group of insurance contracts at each reporting date will be the sum of: c the liability for remaining coverage, comprising: o the fulfilment cash flows related to service to be provided under the contract in future periods; and o the remaining CSM of the group at that date. c the liability for incurred claims, comprising the fulfilment cash flows for past incurred claims and expenses not paid, including claims that have been incurred but not reported. The locked-in initial discount curve will be used to unwind of discounting for CSM. The impact of changes in estimates of the fulfilment cash flows on the measurement of the CSM depends on whether the changes are related to current (or past) or future service: c changes that relate to current or past service are recognised in profit or loss; and c changes that relate to future service are recognised by adjusting the CSM within the liability for remaining coverage, including changes in the risk adjustment for non-financial risk that relate to future service. This excludes any changes which give rise to a loss on a group of insurance contracts, as well as any changes which adjust the loss recovery component on a group of reinsurance contracts. The changes in fulfilment cash flows related to future service are based on the discount rates applied to the fulfilment cash flows at initial recognition. Changes in the estimates that relate to the effect of the time value of money and changes therein, do not adjust the CSM and are recognised in profit or loss. An amount of the CSM is recognised in insurance revenue in profit or loss in each reporting period based on the insurance contract services provided under the group of contracts. Coverage units The CSM will be recognised as insurance revenue over the duration of the contracts based on the number of coverage units provided in each period. The coverage units are determined using the expired exposure relative to the total exposure of the contract. The exposure used is the political sum insured of each policy as that represents the maximum “benefits” payable to the insured. This exposure years profile captures the profile of the risk ECIC is exposed to, given the non-uniformity of the exposures. For example, it captures a typical loan profile, where the outstanding balance increases with draw downs and then reduce again with repayments. The commercial risk cover is always relative to political risk cover, hence the coverage unit profile is appropriate for both risks. The exposures is discounted to the valuation date to allow for the time value of money. 3.5 Explanation of recognised insurance amounts in profit or loss IFRS 17 will significantly change how insurance contracts are presented and disclosed in the financial statements. Insurance revenue Insurance revenue represents the changes in the liability for remaining coverage over the period for a group of insurance contracts excluding changes in the liability that do not relate to services expected to be covered by the consideration received. The consideration received refers to the amount of premiums paid to the Corporation, adjusted for the discounting effect. The amount of insurance revenue recognised in the reporting period depicts the delivery of promised services at an amount that reflects the portion of premiums the Corporation expects to be entitled to in exchange for those services. The total consideration for a group of contracts covers the following: c expected claims and administration expenses incurred in the period (excluding amounts allocated to the loss component); c amount of the CSM recognised in profit or loss; c release of the risk adjustment for risk expired (excluding amounts allocated to the loss component); and c premium experience adjustments relating to current service.

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