The Insurance Commission (IC) of the Philippines has issued a directive to insurance companies, mandating the adoption of a new accounting standard aimed at enhancing the transparency and international comparability of financial reports.
Starting January 1, 2025, all covered firms are required to implement the Philippine Financial Reporting Standard 17 (PFRS 17), as announced in a circular dated March 1, and published on the commission's website.
“Companies may opt to adopt PFRS 17 in the preparation of their annual financial statements starting Jan. 1, 2023,” the IC said, as reported by the Philippine Life Insurance Association (PLIA), which recently announced a new president.
The PLIA explained that the PFRS 17 aligns with the International Financial Reporting Standard 17 (IFRS 17) and introduces guidelines for the disclosure of insurance contracts. These guidelines include a comprehensive method for calculating insurance reserve liabilities and their correlation with solvency.
Unlike the current intermediary standard, which permits the use of local accounting principles, PFRS 17 advocates for a uniform accounting approach.
The IC's circular specifies distinct reporting obligations for non-life insurance and professional reinsurance companies, including the submission of details on premiums due and uncollected, amounts recoverable from reinsurers, and funds held by or for reinsurers. Life insurance companies are subjected to these requirements and must also report on policy loans and segregated fund assets and liabilities.
Companies delaying the adoption of PFRS 17 are instructed to include the new reporting requirements within their financial statement notes, covering accounting policies, changes in accounting estimates, and errors for the fiscal years 2023 and 2024.
The IC plans to evaluate the impact of PFRS 17 on the financial health and positioning of local insurance entities.
To facilitate this, the regulator has announced the forthcoming issuance of additional advisories related to the assessment and a separate circular concerning actuarial valuation reports. This initiative by the IC underscores its commitment to ensuring the robustness and reliability of the Philippine insurance sector's financial reporting standards.
