IFRS 17: Deloitte comments on new international accounting standard for insurance contracts has been saved
IFRS 17: Deloitte comments on new international accounting standard for insurance contracts
18 May 2017
Francesco Nagari, global IFRS insurance leader at Deloitte, said:
“Today’s publication of IFRS 17 marks a once in a lifetime regulatory change in accounting for insurance policies. The new rules aim to bring greater transparency in the financial reporting of an industry whose accounts have often been labelled as a ‘black box’. A single accounting language for insurers should aid comparability across countries where currently various national practices apply.
“To implement IFRS 17 will take substantial effort. The measurement of insurance liabilities will reflect market interest rates and the impact of policyholders' guaranteed benefits. The revenue from insurance policies will be reported systematically over the coverage service period. The expected profit from the remaining coverage service period will be explicitly reported as a component of the insurance liability.”
Mark McQueen, IFRS 17 accounting lead at Deloitte UK, added:
“Deloitte expects that implementing these new IFRS 17 requirements will entail major changes to insurance companies’ actuarial and finance reporting processes, systems and data. This effort will likely generate implementation costs for many insurers as large as those incurred in the European Union for the adoption of the Solvency II regulations - estimated between three and four billion Euros for the EU insurers as a whole.*
“We see this effort to be higher for life insurers than general insurers. The long-term coverage underpinning life insurance policies, together with the more common presence of options and guarantees in life-policies, will require a much more granular set of accounting and actuarial data.”
Notes to editors
* According to European Commission estimates, the one-off net cost of implementing Solvency II for the whole EU insurance industry has been assessed to be around EUR 3 billion to EUR 4 billion.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
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The information contained in this press release is correct at the time of going to press.
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