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Insurance contracts & investment contracts difference?


what is the difference between insurance contracts & investment contracts? How do we account for investment contracts ?

asked Jan 26, 2013 in IFRS 4 - Insurance Contracts by AcMac Level 2 Member (4,170 points)
retagged Feb 16, 2013 by Mysio

1 Answer

0 votes
An insurance contract is a contract under which the insurer accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Such contracts may also transfer financial risk. The group defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that is significantly more than the benefits payable if the insured event did not occur.
Investment contracts are those contracts that transfer financial risk with no significant insurance risk. These are contracts where the Group does not actively manage the investments of the policyholder over the lifetime of each policy contract. Benefits are linked to the performance of a pool of assets. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.
answered Nov 8 by Finance Professional Level 2 Member (3,680 points)


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