18 June 2018

FRC: Benefits and barriers to implementation of IFRS 17 Insurance Contracts

 Panel members gave their perspectives and made individually the following observations:

• Currently different bases and principles are applied internationally for insurance contract accounting. The IASB spent much time listening to stakeholders and building a consensus around the requirements in IFRS 17.
• Some jurisdictions outside of Europe have already confirmed adoption of the standard, the EU decision on endorsement is expected in 2019.
• EFRAG is in process of gathering evidence to support its advice to the EC on endorsement. The importance of good quality evidence from the UK was stressed.
• The effort to implement IFRS 17 should not be underestimated, both in length and complexity. The adoption of IFRS 9 Financial Instruments needs to be factored into the implementation process.
• For life insurers, transition, level of aggregation and ability to match insurance liabilities and assets were noted as critical aspects for implementation.
• General insurers may be able to use the simpler premium allocation approach, however, changes to the accounting for acquisition costs and the accounting for premiums on a received basis require attention.
• IFRS 17 will address some of the problems of current accounting, especially the inconsistency in financial reporting by insurers. It was noted that IFRS 17 will and cannot be expected to be a perfect solution. It will take time for the new reporting requirements and practices to be embedded.

Full summary

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