IFRS 9 ECL Calculator
for Insurance

IFRS 9 Expected Credit Losses for Insurance

Insurance entities have a distinctive receivable profile that requires careful IFRS 9 application. Premium receivables — the most significant category — arise when policyholders are invoiced for premiums but payment has not yet been received. Under IFRS 17 Insurance Contracts, the boundary between insurance contract assets/liabilities and trade receivables is a critical classification question that directly affects which amounts require IFRS 9 ECL assessment. Amounts within the IFRS 17 measurement boundary are not separately assessed for IFRS 9 impairment — they are included in the insurance contract liability measurement. However, premium receivables outside the IFRS 17 boundary, broker receivables, reinsurance recoverables, and other trade receivables fall within IFRS 9 scope and require simplified approach ECL assessment.

Receivable Characteristics — Insurance

Premium receivables from direct policyholders typically have relatively low credit risk because insurers can cancel coverage for non-payment, creating a natural credit risk mitigation mechanism. Broker receivables are an intermediary risk — the insurer's exposure is to the broker's creditworthiness rather than the underlying policyholder. Reinsurance recoverables from reinsurers represent potentially large balances with credit risk concentrated among a small number of rated reinsurance counterparties. Co-insurance receivables from partner insurers carry the credit risk of fellow insurance companies. Policyholder deductible receivables and subrogation receivables represent smaller but more granular categories with varying credit risk profiles.

Forward-Looking Factors

Forward-looking indicators for insurance receivable ECL should focus on factors that affect the creditworthiness of the entity's counterparties. For policyholder premium receivables, consumer/business financial health indicators (unemployment, GDP growth) are relevant. For broker receivables, the financial health of the intermediary sector and any broker consolidation trends matter. For reinsurance recoverables, reinsurer credit ratings, solvency ratios, and catastrophe loss experience are the primary indicators. The interest rate environment affects both policyholder payment behaviour and the investment returns that support reinsurer solvency.

Regulatory and Audit Context

The IFRS 9/IFRS 17 interaction is the primary audit complexity for insurance ECL. Auditors must verify that management has correctly classified receivables between the IFRS 17 measurement boundary (where impairment is part of the insurance contract measurement) and IFRS 9 scope (where the simplified approach ECL applies). Solvency II regulatory capital requirements may also influence the conservatism of ECL estimates for European insurers. Common audit findings include: failure to separately assess reinsurance recoverables for credit impairment, inadequate documentation of the IFRS 17/IFRS 9 boundary classification, and applying zero ECL to premium receivables without documented justification.

Insurance entities transitioning to IFRS 17 should ensure consistent classification of receivables between IFRS 9 and IFRS 17 scope. Solvency II (EU) and equivalent regimes may influence the conservatism of ECL estimates.