IFRS – 17
The high demand for actuarial resources in the last three years has as we all know been partly fuelled by the solvency II deadline. Now that most companies are near to being compliant in this area solvency II will soon enter more of a maintenance mode except for those companies that start to switch away from standard model and that will bring a new wave of work.
So the phase of work outside of BAU that will use up actuarial resources is IFRS17.
For those of you less familiar with this area here’s a brief introduction: What is IFRS 4? In 2004 the International Accounting Standards Board (IASB) issued an International Financial Reporting Standard called IFRS 4, which provides guidance for the accounting of insurance contracts. IFRS 4 applies to almost all insurance and reinsurance contracts that an entity issues or holds. However, the accounting requirements for insurance contracts under IFRS 4 does not provide users with the information they need to significantly understand the financial position of the insurer, its performance and its risk exposure as compared to other commercial organisations. In 2010 the IASB issued first exposure draft of IFRS4 Phase II which which addresses this issue. Since there the regulation has gone through a number of phases and is now at IFRS17 which is due to be implemented on the 1st of January 2018.
Effectively IFRS will change how insurers account for income and liabilities from insurance contracts and it intends to bring greater comparability to national approaches to liability measurement. The standard applies to all contracts that meet the definition of insurance.
The new accounting standard is expected to be limited to five key areas:
- Treatment of unearned profit in contracts
- Treatment of participating contracts
- Presentation of premiums in the income statement
- Presentation of the effect of changes in the discount rate in other comprehensive income
- Transition by retrospective application.
There are some similarities between the requirements for IFRS and Solvency II, which may result in the opportunity for synergies. However, IFRS introduces a number of requirements which go beyond the scope of Solvency II. gement processes, which according to a number of papers issued by consultancy firms will take up to 2 years to impleAt a practical level preparation for insurance companies will include major restructuring of IT systems and financial manament. Here we go again….