IFRS 17 curva di sconto: descrizione dei possibili metodi e un'applicazione Non-Life per la costruzione della curva di sconto

The paper focuses on IFRS 17 and specifically on the discounting curve, as this new standard will have a great impact on the insurance industry as from January 2023 replacing IFRS 4. The discounting curve definition has been an increasingly topical debated issue in the insurance world. The reason is that in the current IFRS 4 principle, there is not specific requirement for the discounting of the insurance liability, and the same Local Balance Sheet Valuation Approach (LGAAP) is used. On the other hand, in Solvency II Framework, the discounting curve is not derived by the entity, but it is calculated by EIOPA in full and each entity is obliged to apply it to the fulfilment cashflows independently from the underling business. According to IFRS 17 the discounting curve is constructed by each entity and based on the grade of duration and illiquidity of their proper insurance business. IFRS 17 gives entities freedom in the calculation of the discounting rates. IFRS 17 does not prescribe a specific single method for the above computation, it allows for more than one method, but it describes the underlying logics and principles underlying the curve construction. The objective of the paper is to present a possible methodology that an insurance company could use for the definition and the calculation of the proper discounting curve according to IFRS 17. In the first chapter, the paper reports an introduction to the framework of IFRS 17 focusing on the main actuarial topics of the new accounting standard. The second chapter fully describes the characteristics of the discounting curve and the alternative methods for its construction according to IFRS 17 framework: the bottom-up approach, the top-down approach and the combined approach. The bottom-up approach is based on the risk-free curve given by an authority plus a liquidity premium (computed and selected with specific methods presented in the paper and sometimes following the judgement of an actuary). The top-down approach starts from a discounting curve calculated on a reference portfolio which must be adjusted in order to reflect the mismatch between the asset reference portfolio and the insurance liabilities (i.e. with a credit adjustment and market adjustment if needed). The combined approach is not mentioned in the official text of the standard, but it is allowed as a combination of the above two methods. The third chapter contains an application of the methods described in chapter two applied to a real insurance liability non-life cashflows. This application is inspired by a draft educational note written by the Canadian Institute of Actuaries. In this final chapter three different discounting curves have been constructed. The first curve is computed with the top-down approach starting from a reference portfolio described in the Canadian paper. The second curve is calculated adopting the bottom-up approach starting from a risk-free curve given by the bank of Canada. The third and last curve is the EIOPA curve computed with volatility adjustment. This third curve should be applied according to Solvency II standard for all the entities. After their computations, the three curves have been compared and a set of undiscounted cashflows have been selected (the data are taken from the Canadian draft educational note). Their discounts with the three different curves have been computed. Finally, the results have been compared and commented.