BC240 The overlay approach is intended to address the additional accounting mismatches and volatility in profit or loss that may arise if an insurer applies IFRS 9 before applying the forthcoming insurance contracts Standard. To meet that objective:

(a) an insurer may elect to apply the overlay approach only when it first applies IFRS 9; [This includes applying the overlay approach after previously applying either the temporary exemption from IFRS 9 or only the requirements in IFRS 9 for the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss (the ‘own credit’ requirements).] and

(b) a financial asset is eligible for designation if, and only if, it meets both of the following criteria: