IASB on Preparing the Market for IFRS 17 on Insurance Contracts
IASB published an article on preparing the market for the IFRS 17 standard on insurance contracts. The article examines what this standard means for the investor community. It provides an overview of IFRS 17, examines issues with IFRS 4 (the interim insurance contracts standard), analyzes benefits of IFRS 17, and discusses the worldwide impact of the standard.
IASB issued the IFRS 17 standard in 2017 and the standard comes into effect in 2021. The article establishes that the new standard represents a seismic change not only for the insurance companies that will use it but for the user community, particularly for analysts covering the sector worldwide. While many are expecting a turbulent bedding-in period when the standard first comes into effect, insurance analysts worldwide believe it will make a huge difference to the consistency, transparency, and comparability of insurance companies. The most critical question is likely to be whether IFRS 17 and the transparency and comparability it promises to bring will make the insurance sector a more attractive prospect for investors.
The impact of IFRS 17 is expected to be greater in some regions—such as those that routinely use historical interest rate information—than in others. In Asia and Europe, for example, embedded value reporting is voluntarily offered by many insurers to provide information on long-term contracts. While the information about the profitability of long-term contracts provided under IFRS 17 will be more comparable than embedded value reporting, moving away from embedded value will be a significant change for investors. Some analysts are concerned about transitional arrangements to the new standard and concerned that the format of key statements could differ from company to company.
Keywords: International, Insurance, Accounting, IFRS 17, Insurance Contracts, Comparability, Transparency, IASB
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