IFRS 17 - Insurance Contracts
IFRS 17 Standard Released
On May 18, 2017 the International Accounting Standards Board (IASB) published a new IFRS 17 accounting standard, along with several supporting documents of guidance and illustration. This new accounting framework will impact the insurance industry around the world. While the new standard was intended to be effective for most insurers for the 2021 reporting year, subsequent discussions since 2017 have lead to a series of changes in the standard which are expected to be reflected in a new exposure draft in mid-2020. These pending changes include a deferral of the effective date until January 2023.
All of our AXIS clients in Canada, Europe and many in Asia Pacific will be impacted by IFRS 17 along with select US clients with parent companies or subsidiaries based outside the US. We have been following the developments in this project since its inception, anticipating the additional functionality that will be required to satisfy the standard. Upon release of the initial standard in 2017, we assessed the likely impact of its implementation on our clients to determine not only how the AXIS actuarial modeling system needed to be further enhanced but also what other components are needed for a full IFRS solution for insurers. This assessment has not changed materially with the proposed amendments to the standard in 2019 and 2020.
How will Moody's Analytics support IFRS 17 and 9?
The IFRS 17 standard applies a principles-based approach which will require interpretation which may evolve differently in different markets. We have formulated a plan to provide full support for the new requirements, with much of the functionality required to support the detailed calculations in AXIS software already available.
The AXIS system will fully support:
- The application of IFRS 17 and IFRS 9 to life insurance, annuity and disability products for both the calculation of current date accounting liabilities and the projection of those liabilities over future periods
- The application of IFRS 9 for both the calculation of current date asset values corresponding to investments held by life insurers, and the projection of those asset values over future periods
- The derivation of appropriate amounts of revenue, profit or loss, and other comprehensive income for the current reporting period and for projecting future financial statements reflecting IFRS 17 and IFRS 9
- Analytics and disclosures relating to the above calculations as may be required for public or management reporting
How else can Moody's Analytics help customers address IFRS 17?
Moody's Analytics is also developing additional tools to address specific IFRS 17 accounting calculations, as well as data storage and data management challenges of IFRS 17.
These tools are designed with in-built automation and process governance capabilities to facilitate the IFRS 17 calculation processes and to simplify the operational challenges facing insurers. This enterprise data consolidation framework will be tightly integrated with the AXIS system, but importantly it will also be able to accommodate third party cash flow engines. Taken together, this data management layer offers insurers the ability to efficiently generate the IFRS specific calculations needed to support their financial reporting processes.
What is the timetable for IFRS 17 support?
The AXIS system has existing structural and functional strengths that were leveraged as we expanded our offering to support full IFRS functionality. Substantial systems development work has been completed already with support for IFRS 17 methods released in the five main liability modules of AXIS. Many clients are testing these features, preparing data and planning revisions to their internal processes and providing feedback about the additional functionality still needed. We are actively planning additional enhancements and engaging our clients in order to fully understand their needs and expectations.
We are committed to addressing client needs for IFRS 17 in a responsive and collaborative manner. Given the new effective date of January 2023 for the IFRS 17 standard with pending amendments and the need for comparative financials during 2022, we anticipate clients will want substantial delivery of AXIS functionality by early 2021. Additional details on our solution strategy, progress to date, and future roadmap can be found within this microsite.
Representatives of Moody's Analytics are actively engaged in a number of industry forums on IFRS including direct interaction with the IASB, the consulting firms, and participation in various Working Groups (eg. Canadian Institute of Actuaries and the Canadian Life and Health Insurance Association). These ongoing interactions will keep us abreast of the industry's evolving interpretation of the IFRS 9 and IFRS 17 standards and their implications for insurers.
Further technical discussions relating to the detailed implications of IFRS 17 and how Moody's Analytics is addressing its challenges will continue to be developed and communicated to all of our clients.