19 October 2018

ESAs write to EFRAG on the endorsement process of IFRS 17 insurance contracts

The three European Supervisory Authorities (ESA - ESMA, EBA and EIOPA) have written a letter to the European Financial Reporting Advisory Group (EFRAG) regarding the endorsement process of the International Financial Reporting Standard (IFRS) 17.

The three ESAs have consistently highlighted the importance of replacing the current accounting standard for insurance contracts, IFRS 4.

In this context, they have been monitoring EFRAG’s processes relating to the endorsement advice for IFRS 17 and they would have expected a more transparent decision-making process around the recent EFRAG Board letter to the IASB, which urges the IASB to change key building blocks of IFRS 17, and a more in-depth discussion of the technical analysis of EFRAG’s Technical Expert Group.

While, at this stage, they do not express any detailed technical views on IFRS 17, ESAs reiterate the need to continue to progress and to finalise the analysis of IFRS 17 in a timely manner against the background of the effective date of IFRS 17 of 1 January 2021.

In this respect, they highlight that the timely completion of the endorsement process is particularly important taking into account that insurance companies and financial conglomerates undertaking insurance activities have been granted the option to defer the application of IFRS 9, the new standard on financial instruments, until 1 January 2021, which would coincide with the effective date of IFRS 17.

Therefore, ESAs caution against any further delays in the endorsement of IFRS 17, which would challenge the coordinated application of IFRS 9 and the new insurance contracts standard, considering the need for timely application of IFRS 9 to these entities.

Full letter

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