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IFRS 17 - Insurance Contracts


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.
EFRAG's final endorsement advice package consists of the following:
1. Cover Letter;
2. Appendix I (description of the requirements in IFRS 17);
3. Appendix II (FEA assessment and conclusion about the qualitative technical characteristics of all the other requirements in IFRS 17 - apart from the requirement covered in Annex 1);
​4. Appendix III (FEA assessment and conclusion about European Public Good on all the other requirements in IFRS 17 - apart from the requirement covered in Annex 1); and
5. ​Annex 1 (observations about the use of annual cohorts to intergenerationally mutualised and cash-flow matched contracts that are relevant for the FEA assessment of topics usually presented in Appendices II and III).

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:

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:

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.  

On 20 June 2013 the IASB published a revised exposure draft (ED) of proposals for the accounting for Insurance Contracts. The Exposure Draft builds upon the proposals published in the 2010 ED, and reflects feedback received during the extensive public consultation period that followed the publication of those proposals.

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.

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