The latest proposed Exposure Draft (ED) amendments to the IFRS 17 accounting standard for insurance contracts addresses important issues, but more needs to be done, according to Willis Towers Watson.
The International Accounting Standards Board (IASB) published its proposed changes to IFRS 17 on Wednesday, setting a 90-day period for stakeholder comment on the changes.
IFRS 17 Insurance Contracts was originally published by the IASB in May 2017 in response to issues raised by the insurance industry and other stakeholders. The latest proposed amendments include:
- Deferral of the IFRS 17 effective date (and IFRS 9 for insurers) by one year to Jan. 1, 2022
- Additional scope exclusions for loans and credit cards
- Deferral of some insurance acquisition cashflows 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 help in respect of underlying onerous contracts, to remove an accounting mismatch
- Extending the risk-mitigation option to include the use of reinsurance to mitigate financial risk
“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 and across Asia with IFRS 17 implementation,” said Paul Headey, head of life, insurance consulting and technology for Asia Pacific at Willis Towers Watson. “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.”