The risk advisory and broking firm Willis Towers Watson (WTW) has issued a response to the latest changes proposed by the International Accounting Standards Board (IASB) concerning its accounting standard IFRS 17 Insurance Contracts.
The IASB’s limited scope Exposure Draft (ED), published this week, brings together a number of proposals made by the Board in response to issues raised by the re/insurance industry concerning the standard.
These include the deferral of the IFRS 17 effective date by one year to January 1, 2022, additional scope exclusions for loans and credit cards, deferral of some insurance acquisition cash flows for newly issued contracts, and recognition of profit across contracts combining insurance and investment services.
The ED also discusses potentially changing the accounting of certain reinsurance contracts held in respect of onerous underlying contracts, to remove an accounting mismatch.
Additioanlly, it proposes extending the risk mitigation option to include the use of reinsurance to mitigate financial risk, again to remove an accounting mismatch.
“We welcome the proposed IFRS 17 Exposure Draft amendments, which address a number of the issues raised by stakeholders,” said Kamran Foroughi, Senior Director at Willis Towers Watson.
“Certain amendments have substantial implications and the content requires careful analysis. In key areas not addressed by this ED, we expect stakeholders to continue to push for change,” he explained. “However, significant additional changes could require a further postponement of the IFRS 17 effective date, which the IASB strongly opposes.
Foroughi continued: “We are helping clients across the globe with IFRS 17 implementation. In our experience, life, property/casualty and composite insurers are focusing on solving operational and technology implementation challenges, which are largely unaffected by the Exposure Draft.
“As well as considering the Exposure Draft proposals, we believe firms should continue with implementation projects to address these challenges.”
