The Reinsurance Solutions business of Aon, the global re/insurance brokerage, has called for further changes to the way reinsurance will be reported under International Financial Reporting Standard (IFRS) 17.
The recommendations came in response to a consultation draft for amendments to IFRS 17, published in June 2019 by the International Accounting Standards Board (IASB).
Aon agreed that acquisition costs relating to renewals of existing business should be excluded from the valuation of such business.
It noted that, without this change, contracts could be determined as loss-making while not reflecting the economics underlying the transaction.
However, Aon asked the IASB to reconsider the definition of ‘proportionate’ reinsurance to include covers where the percentage of business ceded is not fixed across policies.
The broker that similar relief be granted for holders of non-proportionate covers, and also sought to clarify guidance for retrospective reinsurance covers.
In terms of life reinsurance, Aon agreed with the extension of risk mitigation options to include contracts held for qualifying participating business, but maintained that contracts should be measurable through the Variable Fee Approach.
“Companies have been facing significant operational and technical challenges in implementation, whose costs double those of Solvency II projects in Europe,” said Milena Lacheta, Global IFRS 17 Lead at Aon’s Reinsurance Solutions business,
“As implementation progresses, accounting of reinsurance contracts held emerges as one of the major challenges, and so reinsurance is a key issue,” she added.
Aon’s response follows comments from Willis Towers Watson, which similarly highlighted several areas of the amended IFRS 17 proposal where it argues improvements can still be made.
The IASB will now evaluate the feedback it has received and then redraft and reissue the standard accordingly.
IFRS 17 is currently set to be implemented in January 2022, although a large group of international re/insurance associations have urged the IASB to delay the Standard for another year.
