(paragraph 62 of IFRS 17)

BC304 Many reinsurance arrangements are designed to cover the claims incurred under underlying insurance contracts written during a specified period. In some cases, the reinsurance contract held covers the losses of separate contracts on a proportionate basis. In other cases, the reinsurance contract held covers aggregate losses from a group of underlying contracts that exceed a specified amount.

BC305 The Board decided to simplify the application of the principle that a contract should be recognised from the date the entity is exposed to risk for reinsurance contracts as follows:

(a) when the group of reinsurance contracts held covers the loss of a group of insurance contracts on a proportionate basis, the group of reinsurance contracts held is recognised at the later of the beginning of the coverage period of the group of reinsurance contracts held or the initial recognition of any underlying contracts. This means that the entity will not recognise the group of reinsurance contracts until it has recognised at least one of the underlying contracts.

(b) when the group of reinsurance contracts held covers aggregate losses arising from a group of insurance contracts over a specified amount, the group of reinsurance contracts held is recognised when the coverage period of the group of reinsurance contracts begins. In these contracts the entity benefits from coverage - in case the underlying losses exceed the threshold - from the beginning of the group of reinsurance contracts held because such losses accumulate throughout the coverage period.