4.2 Level of Aggregation

IFRS17 mandates insurance companies to recognize the group of insurance contracts that are managed together. All insurance products that share similar risks can be set together by using the Level of Aggregation function of the Oracle Financial Services Insurance Accounting Analyzer application. This helps you to set portfolios and indicate the basis on which the underlying insurance contracts have to be grouped for measurement and reporting the estimates based on IFRS 17 requirements.

Insurance companies possess a large portfolio of contracts that have to be managed and assessed for net liabilities. The Level of Aggregation function enables insurance companies to identify and group similar insurance contracts. The aggregation of the contractual service margin and net liability is derived from the individual contracts within the level of aggregation.

The extent to which contracts are aggregated may have a significant impact on the statement of comprehensive income of an insurance entity and its systems, processes, and data. The insurance contracts can be grouped within a legal entity and line of business, based on other parameters such as geography, year of inception, and remaining term.