CMF published a regulatory proposal on the implementation of IFRS 17 on insurance contracts in Chile. The proposed regulation is intended to modernize the rules on “technical reserves,” aligning them with the best international practices and principles in this field. IFRS 17 seeks to improve comparability among information from different companies and to ensure that technical liabilities on the balance sheet of the insurance companies are valued at market value. The consultation period will be open until May 12, 2021. CMF also announced that it will soon send a notice, along with instructions, to the insurance companies, to conduct its second impact assessment on the implementation of IFRS 17.
The implementation of IFRS 17 is expected to improve the transparency of information reported by insurance companies in their financial statements. It is also expected to ensure that companies provide relevant information, which accurately represents the insurance contracts, by establishing the principles for recognition, measurement, presentation, and disclosure with respect to the said contracts. The proposal considers both the experience of other jurisdictions that serve as a reference for Chile and the international recommendations on the constitution of technical reserves. The following are the key elements addressed in the proposed regulation:
- Implementing IFRS 17 and replacing the current standard, which is mainly based on IFRS 4
- Establishing main principles and models provided by IFRS 17, in addition to specific instructions that companies must follow to measure their technical liabilities
- Establishing special considerations applicable to the national market, specifically for life annuities, disability and survival insurance, and the earthquake catastrophe reserve
- A public consultation requiring a statement from the insurance industry on the aspects highlighted by CMF as relevant
Comment Due Date: May 12, 2021
Keywords: Americas, Chile, Insurance, Insurance Contracts, IFRS 17, IFRS 4, Disclosure, CMF
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