03 October 2018

Insurance Europe: IFRS 17 must be good enough: it isn’t yet

European insurers are committed to a high-quality reporting standard for insurance contracts that improves insurers’ financial reporting. The industry therefore 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.

IFRS 17 must be reopened and the 11 issues that were identified during EFRAG’s testing must be addressed. Implementation of the standard needs to be delayed by two years to allow time to make the necessary improvement and to 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 given on the impact on the application date to allow 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.

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