IFRS 17 Insurance Contracts was published in May 2017 by the IASB and, following issues raised by the insurance industry and other key stakeholders, the independent rule-setting body agreed in October 2018 to re-open certain aspects of the Standard.
This ED brings together tentative decisions proposed by the IASB in the following areas (with most aspects of the Standard unamended).
• Deferral of IFRS 17 effective date (and IFRS 9 for insurers) by one year to 1 January 2022.
• Additional scope exclusions for loans and credit cards.
• Deferral of some insurance acquisition cash flows for newly issued contracts, where there are related expected contract renewals.
• Recognition of profit across contracts combining insurance and investment services.
• Changing the accounting of certain reinsurance contracts held in respect of onerous underlying contracts, to remove an accounting mismatch.
• Extending the risk mitigation option to include the use of reinsurance to mitigate financial risk, again to remove an accounting mismatch.
“We welcome the proposed IFRS 17 Exposure Draft amendments, which address a number of the issues raised by stakeholders,” said Kamran Foroughi, Senior Director at Willis Towers Watson. “Certain amendments have substantial implications and the content requires careful analysis. In key areas not addressed by this ED, we expect stakeholders to continue to push for change. However, significant additional changes could require a further postponement of the IFRS 17 effective date, which the IASB strongly opposes.
“We are helping clients across the globe with IFRS 17 implementation. In our experience, life, property/casualty and composite insurers are focusing on solving operational and technology implementation challenges, which are largely unaffected by the Exposure Draft. As well as considering the Exposure Draft proposals, we believe firms should continue with implementation projects to address these challenges.”
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