In the spotlight - Minimising accounting mismatches relating to financial risk for insurers
IFRS 17, ‘Insurance Contracts’ will bring significant changes to how insurers account for the insurance contracts that they issue. For many insurers, IFRS 9, ‘Financial Instruments’will also bring changes to the accounting for assets held to back the obligations arising from insurance contracts. In some cases, the interaction of IFRS 9 and IFRS 17 might give rise to accounting mismatches between how insurance contracts and the assets held to back them are recognised and measured. This publication considers how these mismatches can be minimised by using the choices available within IFRS 9 and IFRS 17 where insurers use financial assets within the scope of IFRS 9 to mitigate such financial risks, including by applying hedge accounting. It also explores how hedge accounting could be applied, in practice, to common hedging strategies used by insurers.