(paragraphs 39 and B93-B95F of IFRS 17)

BC323 IFRS 17 requires an entity to treat the consideration for insurance contracts acquired in a transfer of insurance contracts or a business combination, including contracts in their settlement period, as a proxy for premiums received. This means that the entity determines the contractual service margin, in accordance with the general requirements of IFRS 17, in a way that reflects the consideration paid for the contracts.

BC324 Thus, when applying paragraph B95 of IFRS 17, the entity determines the contractual service margin or loss component of the liability for remaining coverage at initial recognition for a group of insurance contracts acquired in a transfer of insurance contracts or a business combination using the consideration received or paid for the contracts as a proxy for premiums received. [In June 2020, the Board amended IFRS 17 to replace references to 'a business combination' in paragraphs 39 and B93-B95 of IFRS 17 with 'a business combination within the scope of IFRS 3' (see paragraph BC327A).] There is no contractual service margin if a group of insurance contracts issued is onerous. In those cases, the amount by which the group is onerous is recognised:

(a) immediately as an expense in profit or loss for a transfer of insurance contracts, in the same way as for insurance contracts that the entity issues.