IFRS reports & accounts: Standard disclosure of liability adequacy test questioned

The Italian insurance company Generali discloses it adopts liability adequacy tests for its life and non-life insurance provisions, which is in line with IFRS, but standard transparency questions continue.


IFRS 4, Insurance Contracts, Generali accounts for life insurance contracts and investments with discretionary participation features and non-life insurance provisions according to local GAAP (para 22). The insurance provisions are subjected to the liability adequacy test, which is met by the life and non-life insurance provisions.

In line with the minimum requirements of

IFRS 4, Generali considers if the estimated cashflows of the contracts are adequate and if not, the deficiency is recognised in the profit or loss (para 15). There are no further requirements under IFRS to make any further disclosures.

Similar practices can be found in Zurich, with ING disclosing the confidence levels at which inadequacy is deemed. In relation to the liability adequacy test, it is unfortunate that

IFRS 4 does not require disclosure of the underlying assumptions. The lack of transparency here is particularly acute given that measurement continues to retain a basis grounded in local GAAP.
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