IASB Issues Amended Standard on Insurance Contracts

The International Accounting Standards Board (IASB) has published an exposure draft 'Amend­ments to IFRS 17' to address concerns and im­ple­men­ta­tion chal­lenges that were iden­ti­fied after IFRS 17 'Insurance Contracts' was published in 2017. Comments are requested by 25 September 2019. 


Since IFRS 17 Insurance Contracts was issued in May 2017, the Board has been mon­i­tor­ing the im­ple­men­ta­tion and has learned about concerns and im­ple­men­ta­tion chal­lenges. The Board had pre­vi­ously indicated that it would consider whether ad­di­tional action is needed to address matters arising during im­ple­men­ta­tion. At the October 2018 meeting of the Board a list of 25 potential amend­ments to the standard was iden­ti­fied and the criteria against which any possible amendment would be con­sid­ered were agreed. 

Sub­se­quent dis­cus­sions in the project on possible amend­ments to IFRS 17 led to the proposed amend­ments that are included in today's exposure draft. 

Suggested changes

The main changes proposed in ED/2019/4 Amend­ments to IFRS 17 are:

Deferral of the date of initial ap­pli­ca­tion of IFRS 17 by one year to annual periods beginning on or after 1 January 2022 and change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial In­stru­ments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2022.

Ad­di­tional optional scope exclusion for loan contracts that transfer sig­nif­i­cant insurance risk and related tran­si­tion re­quire­ments to enable entities issuing such contracts to account for those contracts applying either IFRS 17 or IFRS 9.

Ad­di­tional scope exclusion for credit card contracts that provide insurance coverage.

Amend­ments regarding al­lo­ca­tion, recog­ni­tion, as­sess­ment of the re­cov­er­abil­ity, and dis­clo­sure regarding insurance ac­qui­si­tion cash flows relating to expected contract renewals.

Amend­ments regarding the con­trac­tual service margin (CSM) al­lo­ca­tion relating to in­vest­ment com­po­nents and related dis­clo­sure re­quire­ments so that in the general model the CSM is allocated on the basis of coverage units that are de­ter­mined by con­sid­er­ing both insurance coverage and any in­vest­ment return service.

Extension of the risk mit­i­ga­tion option to include rein­sur­ance contracts held.

Amend­ments to require an entity that at initial recog­ni­tion recog­nizes losses on onerous insurance contracts issued to also recognize a gain on rein­sur­ance contracts held.

Sim­pli­fied pre­sen­ta­tion of insurance contracts in the statement of financial position so that entities would present insurance contract assets and li­a­bil­i­ties in the statement of financial position de­ter­mined using port­fo­lios of insurance contracts rather than groups of insurance contracts.

Ad­di­tional tran­si­tion relief for business com­bi­na­tions.

Ad­di­tional tran­si­tion relief for the date of ap­pli­ca­tion of the risk mit­i­ga­tion option and the use of the fair value tran­si­tion approach.

The exposure draft also contains several smaller proposed amend­ments.

Comments on the proposed changes are requested by 25 September 2019.

Effective date

The proposed effective date for the amend­ments would be the same as the proposed new effective date for IFRS 17 (1 January 2022) with early ap­pli­ca­tion permitted. The amend­ments would be applied ret­ro­spec­tively.