Premium Receivables from an Intermediary (IFRS 17 and IFRS 9)

[March 2023] the IFRS Interpretation Committee (Committee) received two submissions about how an entity that issues insurance contracts (for insurer) applies the requirements in IFRS 17 (insurance contracts) and IFRS 9 (financial instruments) to premiums receivable from an intermediary.

-Project History

March 2023: Tentative Agenda Decision

March - Sept. 2023: Tentative Agenda Decision Feedback

Sept. 2023 - Oct. 2023: Agenda Decision

-Fact Pattern

In insurance company operations, insurance product sales distribution channels can involve intermediary (e.g. agent or broker). An intermediary acts as a link between an insurer and a policyholder (PH) to arrange an insurance contracts between them.

Premium receivables from intermediary are recognized when the intermediary has not paid the premium to the insurer, but has provided insurance services to the policyholder (PH). If the intermediary fails to pay the premiums to the insurer:

1. the insurer doesn’t have the right to recover the premiums from the PH, or
2. to cancel the insurance contract.

This is common in insurance companies, especially general insurance. Illustration of fact pattern of premium receivable from intermediary is depicted in Figure 1.

-Accounting Treatment Issue

From this fact pattern, there are two views that raise questions about the scope of premium receivables from intermediaries, whether it will be in-scope in (1) IFRS 17 which includes the measurement of future cash flows within the contract boundary or (2) IFRS 9 as a financial asset.

-Focuses on measurement with general model / BBA / GMM,

View 1 (IFRS 17): the insurer continues to treat the premiums receivable from the intermediary as future cash flows within the boundary of an insurance contract and, applying IFRS 17, includes them in the measurement of the group of insurance contracts until recovered in cash;

View 2 (IFRS 9): Because the payment by the PH discharges its obligation under the insurance contract, the insurer considers the right to receive premiums from the PH to be settled by the right to receive premiums from the intermediary. The insurer therefore determines that the premiums receivable from the intermediary are not future cash flows (FuCF) within the boundary of an insurance contract but, instead, a separate financial asset (IFRS 9).

-Initial Consideration (Based on Staff Paper)

Two main approaches have been identified:

1. Apply IFRS 17 to account for premium receivable in all circumstances,
2. Apply IFRS 17 to account for premium receivable, except premiums receivables via intermediaries once the PH have satisfied their obligation to pay premiums by paying the intermediary, in which case IFRS 9 applies

-Final Decision

(1) The Committee observed that IFRS 17 is silent on whether FuCF within the boundary of an insurance contracts are removed from the measurement of Group of Insurance Contracts (GoC) only when these CF are recovered or settled in cash.

(2) The Committee observed that, in accounting for premium receivables from intermediary when payment by the PH discharges the PH's obligation under the insurance contract, an insurer develops and applies an accounting policy in accordance with IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors to determine when CF are removed from the measurement of GoC.

(3) The Committee observed that the application of either View 1 or View 2 when accounting for premiums paid by a policyholder and receivable from an intermediary would provide users of financial statements with useful information based on the requirements in IFRS 17 or IFRS 9.

Reference:

IASB Projects (2023): https://www.ifrs.org/projects/completed-projects/2023/premiums-receivable-from-an-intermediary-ifrs-17-and-ifrs-9/#project-history

Author Note (2025)