November 16, 2018

APRA published a notification describing its planned approach for the integration of the insurance contracts standard AASB 17 into the capital and reporting frameworks for insurers. The APRA notification is intended for all life insurers, general insurers, and level 2 insurance groups. APRA has a capital framework for life insurers and general insurers (referred to as the Life and General Insurance Capital, or LAGIC, framework). APRA prefers to align capital treatment with the accounting standards, unless departure is justified on prudential grounds.

APRA has commenced a review on how to integrate AASB 17 into the LAGIC framework. APRA undertook a survey of insurers regarding the impact of AASB 17 and published the aggregate results in a letter dated May 31, 2018. Given the likelihood that most or all of the relevant capital prudential standards will be amended as part of the review, APRA intends to consider whether any further amendments should be made to the LAGIC framework in light of experience with the framework since its implementation. Finally, APRA is also reviewing the capital framework for private health insurers. APRA has written separately to that industry, outlining a process for that review, which aligns with the integration of AASB 17 discussed in this letter.

As a next step, APRA will release a discussion paper that outlines the proposed approach at a principles level, including industry-specific adjustments where assessed as appropriate and necessary. APRA is engaging with the Actuaries Institute’s AASB 17 Task Force to build an understanding of the technical issues, along with the potential options for addressing them in the prudential framework. The options developed through this process will inform APRA’s development of a discussion paper currently planned for release toward the end of the 2019.

AASB 17 will be effective for annual reporting periods beginning on or after January 01, 2021. However, IASB has voted on November 14, 2018 to propose a one-year deferral of the effective date of the international insurance contracts standard IFRS 17, to January 01, 2022. This proposed deferral is subject to public consultation in 2019.

 

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Keywords: Asia Pacific, Australia, Insurance, AASB 17, Insurance Contracts, IFRS 17, Capital Framework, Reporting, APRA

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