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ESBG appreciates the efforts of EFRAG in working with the IASB and totally support EFRAG's position which considers that the "Amendments do not achieve a completely level playing field within the insurance sector". ESBG is convinced that ensuring a level playing field between all entities that have insurance activities is a key element when defining the deferral of IFRS 9.
As mentioned in its position ESBG supports the application of the deferral approach below reporting entity level. This position takes into account the competitive disadvantages that a different approach will generate.
The current situation (i.e. financial conglomerates whose activities are not predominantly connected with insurance in the way defined by the IASB are not eligible to apply the optional temporary exemption from applying IFRS 9 until 2021) could lead to a competitive disadvantage for insurance companies that are part of financial conglomerates as opposed to insurance groups. ESBG members have suggested that EFRAG's claim that there is no material evidence of competitive issues when the draft advice states that 20% - 25% of insurance companies will not be eligible for temporary exemption is a clear contradiction.
Furthermore, it is ESBG opinion that the difference in the application dates will impact the understandability of the financial statements, users of financial statements will find it difficult to understand the additional accounting mismatches and resulting volatility in profit or loss that cannot be offset by using existing options under IFRS 4 Insurance Contracts to address temporary volatility (only the temporary exemption from applying IFRS 9 helps mitigate all the concerns of the misalignment). In addition to this it will be very challenging to determine the parts of the volatility and accounting mismatches caused by the different effective dates. Also, it will be difficult to inform users what business model assessment changes will result from the adoption of IFRS 9 in 2018 and then further from the adoption of IFRS 17 in 2021.