Following the same logic, the magnitude of the effect of an event is considered sufficient if the effect on the policyholder is significant when compared to the minimum benefits payable in a scenario of commercial substance. Payments made which do not compensate the policyholder for the effect of the insured event, . payments made for competitive reasons, are not taken into consideration in the assessment of insurance risk. However, IFRS 4 does not limit the payment by the insurer to an amount equal to the financial impact of the adverse event. The definition therefore does not exclude ‘new–for–old’ cover that pays the policyholder an amount sufficient to replace.
