Global insurance and reinsurance broker Willis Towers Watson (WTW) has responded to the International Accounting Standards Board’s (IASB) amendments to the IFRS 17 Standard, highlighting a number of areas which require further improvement.
WTW has commented on the IFRS 17 Exposure Draft (ED), which was released on June 26th, 2019 and which contains amendments to the IFRS 17 Standard.
The re/insurance broker has analysed all of the amendments put forward, tested its conclusions with clients and subsequently submitted a response to the IASB.
Serhat Guven, Managing Director and Global IFRS Lead at WTW, said: “We commend the IASB for reopening and updating the Standard to address key concerns brought forward by those impacted by the Standard.”
Following its extensive review of the proposed amendments, WTW has outlined a number of areas where further improvement is needed.
This includes a need to broaden the definition of reinsurance contracts that provide proportionate coverage as WTW feels that currently, this would exclude a number of commonly-used types of reinsurance protection that the broker fees should be considered proportionate.
Second, WTW explains that while the proposed amendments offer additional relief in certain instances when reinsurance is used to mitigate financial risk, it’s of the broker’s view that this option should be extended to permit assets held to also be included.
Thirdly, WTW states that the permitted modifications to the Full Retrospective Approach (FRA) to implement the Modified Retrospective Approach (MRA) are too narrow and restrictive, which the broker says will lead to a significant amount of business being restated on the Fair Value Approach (FVA) at transition.
“We continue to work with clients globally in help with the implementation of IFRS 17. The amendments proposed by the IASB will cause additional work to implement, given that insurers have already spent considerable time and effort based on the May 2017 IFRS 17.
“However, we believe the proposed amendments, with some additional enhancements, will result in a better IFRS 17 Standard in general that more closely reflects how companies underwrite and manage insurance risk,” said Guven.