3.1.2 Identifying Portfolios of Insurance Contracts

To group the insurance contracts, as the first step the portfolios must be identified. Contracts in the same product line are expected to possess similar risks and can be managed together. Therefore, such contracts in the same product line are grouped in the same portfolio.

For example:

• Whole life insurance
• Annuities
• Car insurance

Portfolios of contracts are divided into groups of a minimum of the following:

• Onerous at initial recognition
• No risk of being onerous
• Remaining contracts in the portfolio

IFRS 17 permits these groups to be further subdivided. For example, you can create sub-groups based on different levels of profitability.

The level at which to perform grouping assessment includes the following:

• An entity may assess a set of contracts if reasonable and supportable information enables it to conclude the contracts will be in the same group.
• Otherwise, groups are determined by considering individual contracts.
• Multiple sets or individual contracts can form a group.

Note:

If the requirements of IFRS 17 are met, a group can be formed with any number of contracts or an individual contract.