I don’t know the answer to this one. I see the logic of what you’re saying, more so than whatever logic the notes are trying to make with regards to the tax-deductible characteristic of claims . At the same time, when I look online, I see this paper making the claim that, “
Discount rates will reflect the nature of insurance contract liabilities under IFRS 17 rather than the nature of the assets held” being listed as an “improvement in IFRS 17 compared with IFRS 4”, which seems to go contrary to the argument you’ve made (though I don’t know the reasoning for the quoted statement.) See table 1 in
https://www.bis.org/fsi/publ/insights26.pdf
There’s also this old paper on Discounting in GI by an IoA working party (from 1987!) which says (paragraph 6.3, p10) , “There has been some theoretical argument over whether the rate of discount should be on a gross or net of tax basis. The working party has concluded, through worked examples, through logic and through parallels with appraised values, that a gross rate is appropriate where discounted provisions are used for tax purposes. Accounts drawn up on this basis would produce a zero profit in each year of a run off situation where claims and interest payments are accurately known and where the asset income matches the claim outgo.”
https://www.actuaries.org.uk/system/files/documents/pdf/discounting.pdf
Again, they don’t explain more about the logic they talk of or provide the worked examples, so I’m left with a question mark in my mind about this one for now!
Hopefully someone else reading the forum will have clearer insight. Or maybe ask on one of the Life forums, since discounting has been more traditionally applied there.
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