IASB changes to IFRS 17 Insurance Contracts welcome: Willis Towers Watson
Changes the International Accounting Standards Board (IASB) could make to IFRS 17 Insurance Contracts could help ensure reinsurance remains attractive as a risk mitigation tool and avoid unintended consequences such as raising barriers for new entrants, it has been claimed.
The IASB met on Wednesday 23 January 2019 and proposed amending key aspects of IFRS 17 Insurance Contracts. This follows its commitment in late 2018 to reopen certain aspects of IFRS 17 Insurance Contracts as one of its highest priority activities, following concerns raised by the insurance industry and other key stakeholders.
As a result, the IASB also agreed to propose a one-year delay to the effective date of IFRS 17 to 1 January 2022.
At the January 2019 meeting, reflecting insurance industry feedback, the IASB agreed by a significant majority to propose four key IFRS 17 amendments:
It will change the accounting of proportionate reinsurance held in respect of onerous insurance contracts, to better match and enable a more economic net outcome.
Where reinsurance is held to mitigate financial risk in contracts measured using the general measurement model, it plans to remove the accounting mismatch found in the original IFRS 17 standard related to the impact of financial movements over time.
It will enable the deferral of some insurance acquisition cash flows for newly issued contracts, where there are related expected contract renewals.
And for insurance contracts containing both an insurance and investment component and measured using the general measurement model, it will recognise both the insurance and investment components in setting the profit recognition patterns to help avoid distortions.
Kamran Foroughi, senior director at Willis Towers Watson, said: “We welcome the IASB’s pragmatism. The reinsurance decisions will help ensure reinsurance remains attractive as a risk mitigation / funding activity and avoid unintended consequences such as raising barriers for new entrants.”
He continued: “In supporting these changes, the IASB has tried to avoid an overly prescriptive approach, referring in its proposals to the exercise of judgement and ‘a systematic and rational’ basis.
“The board acknowledged that in making these changes there may be a resulting increase in complexity, albeit outweighed by the benefits arising from reflecting the economic substance. As a result, preparers will need to consider carefully how to interpret the standard. In some cases, this may require significant additional analysis to be performed.
“It is clear from the latest IASB meeting that insurers should keep going with projects ensuring they are on track for a 2022 implementation, with the direction from the IASB becoming much clearer and only a small number of topics outstanding. Although these proposed changes largely stem from industry feedback, the effort required to understand and assess their impact should not be underestimated.”
Get all the latest re/insurance industry news with our daily newsletter - sign up here.
More of today's news IGI hires former Swiss Re exec as Labuan CEO
Willis Re International appoints head of strategic and financial analysis
Allianz partners with technology firm to enter Vietnam’s general insurance market
Newline hires CNA Hardy exec as senior underwriter
Nordic insurer Gjensidige hires former AXIS/LGT exec as head of reinsurance
Everest Insurance adds property, commercial auto, workers’ comp to life sciences offering
Marine insurer North P&I Club boosts loss prevention team in Singapore
Download our survey inforgraphic: 'The Impact of Automation on Commercial Lines'
Already registered?
Login to your account
If you don't have a login or your access has expired, you will need to purchase a subscription to gain access to this article, including all our online content.
For more information on individual annual subscriptions for full paid access and corporate subscription options please contact us.
To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.
For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk
Editor's picks
Editor's picks
More articles
Copyright © intelligentinsurer.com 2024 | Headless Content Management with Blaze