BC11 The definition of an insurance contract determines which contracts are within the scope of IFRS 4 rather than other IFRSs. Some argued that phase I should use existing national definitions of insurance contracts, on the following grounds:

(a) Before phase II gives guidance on applying IAS 39 Financial Instruments: Recognition and Measurement [IFRS 9 Financial Instruments replaced IAS 39. IFRS 9 applies to all items that were previously within the scope of IAS 39.] to difficult areas such as discretionary participation features and cancellation and renewal rights, it would be premature to require insurers to apply IAS 39 to contracts that contain these features and rights.  

(b) The definition adopted for phase I may need to be amended again for phase II. This could compel insurers to make extensive changes twice in a short time.

BC12 However, in the Board’s view, it is unsatisfactory to base the definition used in IFRSs on local definitions that may vary from country to country and may not be most relevant for deciding which IFRS ought to apply to a particular type of contract.