OSFI Sets Out Plans for Implementation of Insurance Contracts Standard
OSFI published a letter that provides an update on the milestones completed and the activities underway with respect to the implementation of the insurance contracts standard International Financial Reporting Standard (IFRS) 17. OSFI announced its intention to extend the implementation timeline for IFRS 17 in the event that IASB defers the effective date by one year to January 01, 2022. In terms of planned activities with respect to the implementation of IFRS 17, OSFI plans to hold discussions with the federally regulated insurers on IFRS 17 policy choices in the Fall of 2019, finalize the regulatory returns for IFRS 17 by June 2020, and finalize the Life Insurance Capital Adequacy Test (LICAT) and Minimum Capital Test (MCT) 2022 guidelines in 2021.
On June 26, 2019, IASB released an exposure draft proposing amendments to IFRS 17, one of which is a deferral of the effective date by one year to January 01, 2022. If IASB approves the amendments to IFRS 17, including the new effective date, and the Canadian Accounting Standards Board incorporates them into the CPA Canada Handbook, OSFI will revise its publicly posted advisories and update the timeline for the key milestones communicated in its June 27, 2018 Capital letter accordingly. Additionally, in the Fall of 2019, OSFI will hold consultative discussions on IFRS 17 Accounting Policy choices with federally regulated insurers to understand positions taken and determine if there is consistency and/or comparability of IFRS 17 application across the Canadian industry.
In its June 27, 2018 letter on LICAT and MCT 2021 Review for IFRS 17, OSFI had communicated to federally regulated life and property and casualty (P&C) insurers its plans for adapting the insurance capital guidance for IFRS 17. This letter included timelines for completing key milestones in revising Guideline A on LICAT for life insurers and Guideline A on MCT for P&C insurers. Then, in September 2018, OSFI had consulted with various insurance industry participants and distributed updated draft LICAT and MCT 2021 guidelines, along with a questionnaire or data collection exercise. OSFI considered the responses, comments, and data and discussed the feedback it received with consultation participants to prepare the revised guidelines. In June 2019, OSFI released, to various insurance industry participants, the second draft of LICAT and MCT 2022 guidelines, the draft regulatory capital forms and instructions, and the QIS 1. The QIS 1 submissions are due on October 31, 2019. If IASB approves the new IFRS 17 effective date, OSFI expects to add another directed consultation in June 2020. The directed consultation will cover near-final LICAT and MCT 2022 guidelines, forms, and QIS 2. QIS 2 may include sensitivity testing to assess the overall capital impact and determine the need for calibration or transitional arrangements. OSFI intends to finalize the LICAT and MCT 2022 guidelines in 2021.
In June 2019, the insurance industry was provided draft regulatory returns updated for IFRS 17. The goal of OSFI is to launch a public consultation on the draft regulatory returns in November 2019. OSFI intends to finalize the regulatory returns by June 2020. Furthermore, OSFI will continue to monitor IFRS 17 progress through the semi-annual progress reports. In September 2018 and March 2019, federally regulated insurers had submitted progress reports on their implementation plans and levels of preparedness, as outlined in the OSFI advisory on IFRS 17 transition and progress report requirements for federally regulated insurers. OSFI encourages insurers to continue their efforts toward implementing IFRS 17 and use any additional time provided by IASB for testing and quality assurance purposes. OSFI highlights, in its letter, that it will continue to work with the industry and selected stakeholders to support a robust implementation of IFRS 17.
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Keywords: Americas, Canada, Insurance, IFRS 17, Insurance Contracts, Implementation Timeline, Reporting, LICAT, MCT Guideline, OSFI
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