Insurance Regulatory eBulletin - Insurance accounting

IFRS 17 event summary
On 18 June, the FRC published a document summarising a FRC panel discussion on the benefits and barriers to implementation of IFRS 17 Insurance Contracts held on 24 April 2018. The document sets out the general observations made by the FRC Panel members including:

  • currently different bases and principles are applied internationally for insurance contract accounting;
  • the effort to implement IFRS 17 should not be underestimated, both in length and complexity;
  • some jurisdictions outside of Europe have already confirmed adoption of the standard, the EU decision on endorsement is expected in 2019;
  • general insurers may be able to use the simpler premium allocation approach, however, changes to the accounting for acquisition costs and the accounting for premiums on a received basis require attention;
  • IFRS 17 will address some of the problems of current accounting, especially the inconsistency in financial reporting by insurers but it will and cannot be expected to be a perfect solution.
The panel discussion also covered the alignment with Solvency II and the differences between the two regimes. The FRC also confirmed it will review the IFRS 17 implementation experience of listed insurers before considering the case for changing FRS 103 and any changes would be subject to public consultation.