Insurance Europe calls for a two years delay in IFRS17 implementation
In a statement published on October 3, Insurance Europe affirms European insurers' commitment to high-quality reporting standards for insurance contracts that improve insurers' financial reporting, emphasizing that the industry supports the new International Financial Reporting Standard (IFRS 17) for insurance contracts and is allocating considerable resources to prepare for its implementation. However - as confirmed by the European Financial Reporting Advisory Group's (EFRAG) own studies - there are problems with the way the standard depicts insurers' performance and business model that must be resolved before IFRS 17 is endorsed.
Thus, the federation believes that IFRS 17 must be reopened and the 11 issues that were identified during EFRAG's testing must be addressed. Implementation of standard needs should be delayed for two years to allow time to make the necessary improvements and allow time for the wide range of companies that are affected to implement the standard.
The decision to re-open IFRS 17 should be made as soon as possible and as much clarity should be provided with regard to the impact of the application date, allowing companies to plan accordingly. However, there is no expectation that a delay will result in companies pausing implementation projects.
The additional time will allow insurers to deal with operational constraints, such as the current lack of software solutions, and will allow for implementation of suitable quality and reliability. It will also allow for a better understanding of the potentially very different new financial reporting figures.
The industry is well advanced in its efforts to propose workable solutions to the 11 issues that have been raised.
Insurance Europe's opinion is backed by the A.M. Best rating agency's analyst in a briefing that says: "Following a long period of preparation and discussion, the standard was published May 18, 2017, with an effective date of Jan. 1, 2021. However, in A.M. Best's opinion, this leaves insurers with a relatively short period for preparation as they also have to provide comparative figures for the previous year (2020). The major (re)insurers are in very early stages of adopting IFRS 17, and there have already been calls for a postponement to its implementation date."
The briefing added although IFRS 17 will impose a basic model applicable to all jurisdictions for insurers reporting under IFRS, "A.M. Best anticipates there will still be some issues of comparability, especially when the standard is first introduced. There are likely to be some areas of interpretation, such as the determination of discount rates, and the criteria on which segmentation of business will be based. With time, those approaches are expected to converge and help comparability."