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The IAIS supports the IASB and FASB’s efforts to produce a converged approach to both financial instrument and insurance accounting in so far as is possible. Convergence remains a worthwhile objective.
Moreover, the IAIS is encouraged to see that the Board has endeavoured to address issues for the insurance industry arising from IFRS 9 and the Board’s tentative decisions to date on insurance accounting. IFRS 9 is of particular interest and importance to insurance entities and insurance supervisors given the significant interaction between financial instrument and insurance accounting.
In general, IAIS members believe that the proposed amendments, in particular the introduction of the category of fair value through other comprehensive income, go some way to address concern expressed in IAIS´s response to the July 2010 Insurance Contracts ED, and subsequently, regarding the need for greater consistency of measurement approaches for insurance liabilities and those financial assets held to match those liabilities.
However, as indicated in IAIS´s previous comment letters some members do not believe that an OCI solution is appropriate for insurance contract accounting. Amongst those members are some who would prefer no change to IFRS 9 and no OCI category for insurance liabilities.
As insurance supervisors, the IAIS would like to reiterate the importance of synchronised application of IFRS 9 and the expected insurance contracts standard. The IAIS believes that the Board should consider whether a general delay in the effective date of IFRS 9 is now appropriate and, if not, the IAIS encourages the Board to consider introducing an exception for insurers so as to enable implementation of IFRS 9 and IFRS 4 phase II concurrently.
The IAIS would also like to stress the importance of optionality within IFRS 9, so that financial assets might be measured on a basis that is most appropriate for the related insurance liabilities and so that the matched nature of insurance activities can be best represented.