SLIDE 1

FINANCIAL ACCOUNTING FOR

SPECIALIZED INDUSTRIES
 2

ncial loss. It is
VIDES
ed to hedge 3
loss.
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a policy, in 2
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es from an
WHAT IS INSURANCE?
NOW 1
ents' risks to
ured. IS
 3

“LIFE’S BRIGHTER UNDER THE SUN”

Sun Life has life insurance plans to meet your financial needs
for every important stage in your life. From getting started with
simple and affordable protection plans, to building funds with
investment-linked products to fulfill life goals.
 4

“IN LIFE FOR GOOD”

We've got you covered. As we move towards the
future, we are enabled more than ever to bring out the
good in your life while continually serving the greater
good. We’re here for good, and this promise starts
with the changes we make today. Today, we are InLife.
We lead every Filipino to A Lifetime for Good.
 5

IFRS 4 Insurance Contracts provides guidance on the accounting treatment of all insurance
contracts except for specific contracts covered by other standards. The standard was published in
March 2004 and is effective from 1 January 2005.

IFRS 4 Insurance Contracts applies, with limited exceptions, to all insurance contracts (including
reinsurance contracts) that an entity issues and to reinsurance contracts that it holds

AN INSURANCE CONTRACT IS A "CONTRACT UNDER WHICH ONE PARTY (THE INSURER) ACCEPTS
SIGNIFICANT INSURANCE RISK FROM ANOTHER PARTY (THE POLICYHOLDER) BY AGREEING TO
COMPENSATE THE POLICYHOLDER IF A SPECIFIED UNCERTAIN FUTURE EVENT (THE INSURED EVENT)
ADVERSELY AFFECTS THE POLICYHOLDER."

FYI: IFRS 4 WAS ISSUED IN MARCH 2004 AND APPLIES TO ANNUAL PERIODS BEGINNING ON OR AFTER
1 JANUARY 2005. IFRS 4 WILL BE REPLACED BY IFRS 17 AS OF 1 JANAURY 2021.
 IFRS 17 6

PROVIDES A ROBUST STANDARD
AS IFRS 4 ALLOWS A MYRIAD OF
DIFFERENR=T ACCOUNTING POLICIES
EVEN WITHIN INSURANCE
INCLUDE COMPLEX,
FUNDAMENTAL ACCOUNTING IN:
- LIABILITY MEASUREMENT
- PROFITABILITY RECOGNITION
FOR INSURANCE CONTRACTS.

3 MODELS FOR DIFFERENT CONTRACT

TYPES:

-BUILDING BLOCKS APPROACH(BBA)

-PREMIUM ALLOCATION APPROACH(PAA)
-VARIABLE FEE APPROACH(VFA)
 7

IFRS4
THE STANDARD:
o CLARIFIES THAT AN INSURER NEED NOT ACCOUNT FOR AN EMBEDDED DERIVATIVE SEPARATELY AT FAIR VALUE
IF THE EMBEDDED DERIVATIVE MEETS THE DEFINITION OF AN INSURANCE CONTRACT [IFRS 4.7-8]
o REQUIRES AN INSURER TO UNBUNDLE (THAT IS, TO ACCOUNT SEPARATELY FOR) DEPOSIT COMPONENTS OF
SOME INSURANCE CONTRACTS, TO AVOID THE OMISSION OF ASSETS AND LIABILITIES FROM ITS BALANCE
SHEET [IFRS 4.10]
o  CLARIFIES THE APPLICABILITY OF THE PRACTICE SOMETIMES KNOWN AS 'SHADOW ACCOUNTING' [IFRS 4.30]
o  PERMITS AN EXPANDED PRESENTATION FOR INSURANCE CONTRACTS ACQUIRED IN A BUSINESS
COMBINATION OR PORTFOLIO TRANSFER [IFRS 4.31-33]
o ADDRESSES LIMITED ASPECTS OF DISCRETIONARY PARTICIPATION FEATURES CONTAINED IN INSURANCE
CONTRACTS OR FINANCIAL INSTRUMENTS. [IFRS 4.34-35]
 VALUATION OF INSURANCE LIABILITY 8

DEFINITION
LIABILITY INSURANCE (ALSO CALLED THIRD-PARTY INSURANCE) IS A PART OF THE
GENERAL INSURANCE SYSTEM OF RISK FINANCING TO PROTECT THE PURCHASER (THE
"INSURED") FROM THE RISKS OF LIABILITIES IMPOSED BY LAWSUITS AND SIMILAR CLAIMS. IT
PROTECTS THE INSURED IN THE EVENT HE OR SHE IS SUED FOR CLAIMS THAT COME WITHIN THE
COVERAGE OF THE INSURANCE POLICY.

INSURABLE RISK
Generally, liability insurance covers only the risk of being sued
for NEGLIGENCE or STRICT LIABILITY torts, but not any tort or crime with a higher
level of MENS REA. This is usually mandated by the policy language itself or case
law or statutes in the jurisdiction where the insured resides or does business.
SLIDE 10

THAN
K YOU