Best’s Special Report: IFRS 17 – A Welcome Advance That Puts Value Measures in Primary Accounts

LONDON--(BUSINESS WIRE)-- The financial reporting of insurers has long been considered problematic for the image of insurers in financial markets, according to a new report by AM Best examining how IFRS 17 will bring consistency and more market-related values to insurance accounting. External financial reporting for insurers currently varies from country to country with relationships to market values that differ across product, territory and other factors.

The Best’s Special Report, titled “IFRS 17 – A Welcome Advance. Value Measures in Primary Accounts. Delay was a Necessity”, notes that, after a 20-year long development period by the International Accounting Standards Board (IASB) and its predecessor body involving a series of consultation exercises and exposure drafts, IFRS 17 was published as a final standard in September 2017. However, the IASB proposed on Nov. 14, 2018 to delay the effective date for implementation of the standard by one year to financial years beginning on or after Jan. 1, 2022 and to re-open it for limited changes. The delay followed industry lobbying that more time is required to implement the standard.

Tony Silverman, associate director – analytics, said: “Whilst some insurers, weighted towards the non-life segment, have objected to a delay as they were advanced with their preparations, many insurers had been lobbying for a delay to IFRS 17 implementation of two years or more. Implementation will be a demanding exercise, particularly for life insurers. It will break the explicit link with regulatory returns for insurers’ financial statements and put a consistent set of value-oriented measures into primary accounts subject to full audit for the first time. For the life segment, it is also likely to cause a significant move away from referring to supplementary reporting or Solvency II returns to communicate these measures and it should provide a new visibility to the delivery of profit expected on issue of contracts.”

Whilst changes for most non-life business will be less dramatic, there is still a degree of uncertainty as to whether large parts of the non-life reinsurance sector will report under the Premium Allocation Approach (PAA) or the Building Block Approach. Contracts reported under the PAA will be subject to discounting of reserves, the reporting of an explicit risk margin and an Unexpired Premium Reserve recorded net of Deferred Acquisition Costs.

AM Best does not expect the standard to have a near-term impact on credit ratings as it does not change the underlying economics of an insurer. AM Best will continue to monitor developments closely with a view to making optimal use of IFRS 17 data in the credit rating process.

To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=283764 .

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Tony Silverman

Associate Director - Analytics

+44 20 7397 0264

[email protected]



Yvette Essen

Director, Research, Communications

& Media – Europe, Middle East & Africa

+44 20 7397 0322

[email protected]



Edem Kuenyehia

Director, Market Development &

Communications

+44 20 7397 0280

[email protected]

Source: AM Best