A new world in IFRS reporting for Asian insurers
Preparing for IFRS reporting for insurance contracts
The Insurance IFRS standard will have a significant impact on Asian-based insurance organizations, whether they are subsidiaries of European insurers or domestic insurers.
In October 2013 the International Accounting Standards Board (IASB) closed their comment period on the impact of the revised proposals for the new International Financial Reporting Standard (IFRS) for Insurance contracts, IFRS 4 Phase II. During this period, whilst users and preparers were formulating their views on the proposals, Deloitte commissioned the Economist Intelligence Unit (EIU) to conduct a survey at the global headquarters of nearly 300 insurance companies and their senior executives, on their preparations to address the implementation of this new standard, and the forthcoming financial instrument standard, IFRS 9.
Of the 300 insurance senior finance executives surveyed, approximately 24% are based in Asia, and of the 53% surveyed based in Western Europe, a large proportion of these insurers have significant operations in Asia.
The impact to Asian-based insurance organizations, whether subsidiaries of European insurers or domestic insurers, are significant given that many Asian countries have adopted IFRS and therefore would need to comply with the standard when issued (currently expected in early 2015).
The challenge for Asian insurers’ to adopt the new Insurance standard is compounded by two key factors.
- Absence of a solvency basis aligned with the new IFRS
- IFRS-US GAAP reconciliation requirements
Many insurers have used the latest exposure draft to commence their preparations and understand the implications of the new standards to their business. This highlights the awareness of the implications of the new standard is growing and it represents a significant change in attitude since the last global survey undertaken in 2012 by Deloitte and EIU.
Key findings from the research:
- The waiting game is over Cost is the key
- Adoption heralds sweeping organizational
- Insurers see mixed benefits
- Boardroom understanding of change is low
- Standards are better for investors.
- Global framework proves elusive