IFRS 17 - Insurance Contracts

On 31 January 2022, EFRAG submitted it final endorsement advice on Initial Application of IFRS 17 and IFRS 9 – Comparative Information (Amendment to IFRS 17) to the EC. The conclusions of the final endorsement advice are the same as those for the draft endorsement advice. The final endorsement advice is available here.

On 28 December 2021, a draft endorsement advice on this Amendment was issued. EFRAG's overall preliminary assessment is that the Amendment satisfies the criteria for endorsement for use in the EU and therefore recommends its endorsement. The draft endorsement advice is available here. On 9 December 2021,  the IASB issued Initial Application of IFRS 17 and IFRS 9 – Comparative Information (Amendment to IFRS 17). 

​On 28 July 2021, the IASB issued an Exposure Draft Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Proposed amendment to IFRS 17) ('the ED'). 

The ED proposed a narrow-scope ​amendment to the IFRS 17 transition requirements for entities that first apply IFRS 17 and IFRS 9 at the same time. ​This proposed amendment relates to financial assets for which comparative information presented on initial application of IFRS 17 and IFRS 9 has not been restated for IFRS 9. Applying the proposed amendment, an entity would be permitted to present comparative information about such a financial asset as if the classification and measurement requirements of IFRS 9 had been applied to that financial asset.​

On 31 March 2021, EFRAG finalised its due process around IFRS 17 and submitted its Final Endorsement Advice on IFRS 17 Insurance Contracts including the June 2020 Amendments to the European Commission.

EFRAG's overall final assessment is reported below:

• The EFRAG Board has concluded on a consensus basis that, apart from the requirement to apply annual cohorts to intergenerationally-mutualised and cash flow matched contracts, all the other requirements of IFRS 17, on balance, (i) meet the qualitative characteristics of relevance, reliability, comparability and understandability required to support economic decisions and the assessment of stewardship, raise no issues regarding prudent accounting, and that they are not contrary to the true and fair view principle, and (ii) are conducive to the European public good;
• Solely with reference to the requirement to apply annual cohorts to intergenerationally-mutualised and cash flow matched contracts, EFRAG Board members do not have a consensus. Seven EFRAG Board members believe that the annual cohorts requirement meets the endorsement criteria, whereas seven EFRAG Board members believe it does not and two EFRAG Board members abstained.

On 30 September 2020, EFRAG issued its Draft Endorsement Advice on IFRS 17 Insurance Contracts as amended in June 2020.  ​The EFRAG Draft Endorsement Advice can be found here. 39 responses from constituents were received.

As a background to the IFRS 17 Draft Endorsement Advice, EFRAG provides the following documents:

• Economic study - This paper has been prepared and made available as an Agenda paper to support EFRAG TEG discussions on 2 July 2020;
• User outreach 2018 ​- This paper has been prepared and made available as an Agenda paper to support the EFRAG Board discussions on 18 December 2019;
• User outreach 2019 - This paper has been prepared and made available as an Agenda paper to support the EFRAG Board discussions on 18 December 2019;
• Preliminary results of the extensive case study - This paper has been prepared and made available as an Agenda paper to support EFRAG TEG discussions on 25 July 2018;
• Preliminary results of the simplified case study - This paper has been prepared and made available as an Agenda paper to support EFRAG TEG discussions on 25 July 2018; and
• Limited Update of the Case studies - Cost benefit analysis - These papers have been prepared and made available as an Agenda paper for EFRAG TEG discussions on 3 September 2020.

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 final comment letter on the ED on 24 September. The EFRAG Comment Letter can be found here.

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.

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

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.

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

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.

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.

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 draft comment letter on the 2013 ED 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.  

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.

In July 2010 the IASB published an exposure draft (ED) on Insurance Contracts. The exposure draft was part of the second phase of the IASB's project on insurance contracts.   

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