Pressure is growing for a delay to controversial new accounting rules (IFRS 17) designed to revolutionise the way insurers report their results, with German insurer Munich Re the latest to call for a postponement. IFRS 17 was unveiled earlier this year and is due to come into force in 2021.
“For the preparers, IFRS 17 will be very expensive, and due to its complexity it will be difficult to understand for the public and the media,” said Jörg Schneider, Munich Re’s chief financial officer.
IFRS 17 has taken 20 years to develop, and is designed to replace the existing standard, IFRS 4, which allows for much more variation between countries. It will affect life insurers more than property and casualty insurers because profits from some long term contracts will have to be recognised over the life of the contract rather than upfront. The new rules could also make insurers’ results more volatile. For insurers in the EU, the new regime comes hot on the heels of the Solvency II capital rules, which also took decades to develop and cost billions to put into practice. Not all EU insurers oppose the new standard. Allianz, Europe’s biggest insurer by market capitalisation, is one of those in favour of IFRS 17.
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