(paragraphs 47-52 of IFRS 17)

BC284 The contractual service margin represents the unearned profit arising from a group of insurance contracts. IFRS 17 prohibits the contractual service margin from becoming negative (except in relation to reinsurance contracts held) because the Board decided that expected losses on groups of insurance contracts should be recognised immediately in profit or loss. [In June 2020, the Board amended paragraphs 48(a) and 50(b) of IFRS 17 for measuring onerous insurance contracts to clarify that those paragraphs relate to both changes in estimates of future cash flows and changes in the risk adjustment for non-financial risk.] Doing so provides timely information about loss-making groups of insurance contracts, and is consistent with the recognition of losses for onerous contracts in accordance with IFRS 15 and IAS 37.