IFRS 17 - Insurance Contracts

Based on the comments received in response to the ED, the Boards began their re-deliberation activities in December 2010.

On 20 June 2013 the IASB published a revised exposure draft (ED) of proposals for the accounting for Insurance Contracts. The Exposure Draft builds upon the proposals published in the 2010 ED, and reflects feedback received during the extensive public consultation period that followed the publication of those proposals.

The revised proposals aim to provide a consistent basis for accounting for insurance contracts and to make it easier for users of financial statements to understand how insurance contracts affect an entity's financial position, financial performance and cash flows. The revised proposals introduce enhancements to the presentation and measurement of insurance contracts while seeking to minimise artificial accounting volatility.

EFRAG issued its draft comment letter on 5 August 2013. Between June and October 2013, EFRAG in co-operation with the National Standard Setters of France, Germany, the United Kingdom and Italy and in coordination with the IASB staff, conducted a field-testing exercise on the revised Insurance Contracts proposals in order to assess whether the new requirements were operational, what their impact would be and the costs and benefits associated with introducing them.

In September 2013, EFRAG staff attended six outreach events organised by the IASB and National Standard Setters, i.e., Germany, France, Italy, Sweden and two in UK.

EFRAG issued its final comment letter on 18 November 2013. EFRAG appreciated the effort with which the IASB had considered its requests to address the accounting mismatches that may arise from the application of different measurement models to financial assets and insurance liabilities, to distinguish short-term volatility from performance of an insurer, to review the proposals relating to the adjustment of the contractual service margin and to introduce retrospective application of the future standard. EFRAG, in its final comment letter, stated the following:

• EFRAG recommended that the contractual service margin represent unearned profit at all times;

• EFRAG did not support the "mirroring" approach proposed by the IASB. Instead, EFRAG recommended that the IASB develop an approach starting with the principles set by the European insurance industry in its response to the ED;

• EFRAG did not support the mandatory use of other comprehensive income to report the effects of a change in interest rate on the measurement of the insurance liability. EFRAG believed that entities should have the option of reporting changes either in other comprehensive income or in profit or loss; the conditions put to the exercise of the option would depend on IASB's decisions regarding the measurement of assets, more particularly, but not only, in the finalisation of the classification and measurement requirements for financial instruments;

• EFRAG did not support the IASB presentation proposals when the simplified approach was not used. EFRAG recommended the summarised margin approach with volume disclosure in the notes in that case; and

• EFRAG continued to request alignment of the effective dates of IFRS 9 and the new standard on insurance contracts.;

On 7 January 2014, EFRAG issued its Feedback Statement on how EFRAG considered the comments provided by constituents. On 15 January 2014, EFRAG issued a field-test report.

The IASB published the Insurance Contracts Standard on 18 May 2017.

On 22 November 2017 EFRAG published a call for expressions of interest to call on participants for its IFRS 17 Case Study. The closing date for expressions of interest was 8 December 2017.

On 7 February 2018 EFRAG published its simplified case study in addition to the above case study. Responses are requested by 31 May 2018.

EFRAG issued three background briefing papers on the requirements of IFRS 17:

• Level of Aggregation issued on 23 February 2018; and
• The Release of the Contractual Service Margin and Transition Requirements of IFRS 17 on 22 March 2018.

The aim of these documents are to provide simplified information on controversial areas of IFRS 17 to enable constituents to understand the issues and be in the position to comment on EFRAG's draft endorsement advice.

On 11 April 2018 EFRAG issued a call for participation in the user outreach on IFRS 17. The user outreach was conducted through structured interviews that took place during May and June 2018.

Based on the results of the case studies and the user outreach, EFRAG issued a letter to the IASB on 3 September 2018 listing 6 topics that merit further consideration.

On 26 June 2019 the IASB issued the Exposure Draft ED/2019/4 Amendments to IFRS 17 (the 'ED'). The ED proposes targeted amendments to IFRS 17 Insurance Contracts to respond to concerns and challenges raised by stakeholders as IFRS 17 is being implemented.

EFRAG has issued its draft comment letter on the ED on 15 July 2019 with a comment period ending on 2 September 2019.

The EFRAG Draft Comment Letter can be found here.