Hi, I've few questions on IFRS 17 chapter: 1. Textbook says for IFRS 17, BEL is discounted form "observable market data". What does observable market data mean here? Is BEL under IFRS 17 based on market consistent approach? i.e. discounted based on risk-free rate? 2. How is yield curve different between IFRS 17 and solvency II? is that solvency II risk free rate are published by EIOPA and IFRS17 risk free rate not? 3. What do we mean by "different expense assumption apply" between IFRS17 and solvency II and so, IFRS BEL value may differ? 4. What do we mean by unbundling of contract? and how does that impact BEL value between IFRS17 and Solvency II.
1. Yes: market-consistent, so based on observable market data such as swap rates 2. Yes: under IFRS 17 the insurer can set its own risk-free yield curve 3. There are rules under IFRS 17 about which expenses should be attributed to contracts and which shouldn't (and so would be recognised separately), and this might result in different expense assumptions compared with Solvency II. Also different per policy expense assumptions might arise due to grouping policies into different cohorts. Any further details on this would go beyond the SA2 Core Reading. 4. Separation of non-insurance and insurance components, potentially being valued differently.
There are indeed contract boundaries under IFRS 17, but the precise definition / application differs from that under Solvency II. Since they are not mentioned under the SA2 Core Reading for IFRS, you should not be expected to know those details.
