Transition to IFRS 17 (full retrospective, modified retrospective, fair value)

IFRS 17 applies to periods beginning on or after January 1, 2023. The transition date, the date at which contracts in force are measured under the new standard, is January 1, 2022, the start of the comparative year. For a 1995 contract still in force, one has to say what CSM it carries on that date, as if the standard had always existed. The rule, in paragraphs C1 to C33, is the full retrospective approach: recompute each group from inception, cohort by cohort. If that is impracticable, for lack of thirty years of data, there are two fallbacks. The modified retrospective approach uses reasonable and supportable information available, with bounded simplifications, to get close to the full retrospective result. The fair value approach, the bluntest, determines the CSM at the transition date as the difference between the fair value of the group, in the sense of IFRS 13, and the fulfilment cash flows. In the 2023 accounts, a significant number of European life insurers used fair value for at least part of the older stock, which set the opening CSM of that stock at a market level rather than a historical one. The choice weighs for a long time: the starting CSM is released over the remaining duration, and the method is read in the notes. A non-life insurer, where most contracts are short, almost always uses full retrospective.