(paragraphs 37 and B86-B92 of IFRS 17)

BC206 IFRS 17 requires entities to depict the risk that is inherent in insurance contracts by including a risk adjustment for non-financial risk in the measurement of those contracts. The risk adjustment for non-financial risk directly measures the non-financial risk in the contract.

BC207 This section discusses:

(a) the reasons for including a risk adjustment for non-financial risk in the measurement of a group of insurance contracts (see paragraphs BC208-BC212);

(b) the techniques for estimating the risk adjustment for non-financial risk (see paragraphs BC213-BC214C); and

(c) the requirement to disclose a confidence level equivalent (see paragraphs BC215-BC217).

Reasons for including a risk adjustment for non-financial risk in the measurement of insurance contracts (paragraphs 37 and B86-B89 of IFRS 17)

BC208 IFRS 17 requires the risk adjustment for non-financial risk to reflect the compensation that the entity requires for bearing the uncertainty about the amount and timing of the cash flows that arises from non-financial risk.