A global group of nine insurance associations has written a joint letter to the International Accounting Standards Board, asking for a two-year delay in the implementation of International Financial Reporting Standard 17 for insurance contracts.
Under the IFRS 17 model, insurance contract liabilities will be calculated as the present value of future insurance cash flows with a provision for risk. The discount rate will reflect current interest rates. If the present value of future cash flows would produce a gain at the time a contract is issued, the model would also require a "contractual service margin" to offset the day one gain. The contractual service margin would amortize over the life of the contract. There would also be a new income statement presentation for insurance contracts, including a revised definition of revenue, and additional disclosure requirements.
It applies to annual reporting periods beginning on or after Jan. 1, 2021.
In the letter, the group said the two-year delay was "essential both to allow for the necessary improvements to the standard and to allow adequate time for the wide range of companies required to apply the standard and meet its significant implementation challenges."
The signatories to the letter were Association for Savings and Investment South Africa, Canadian Life & Health Insurance Association, Financial Service Council of New Zealand, General Insurance Association of Korea, Insurance Bureau of Canada, Insurance Council of Australia, Insurance Council of New Zealand, Insurance Europe and Korea Life Insurance Association.