A lack of transparency from the International Accounting Standards Board (IASB) has hampered efforts to prepare for the introduction of a new insurance company liabilities standard, according to a group of European insurers.
Documents released to IPE under the UK’s Freedom of Information Act show that trade body Insurance Europe complained to the European Commission that “none” of its members had seen a draft of the new International Financial Reporting Standard (IFRS) before its release in May.
The release of the documents follows a successful challenge by IPE after the government’s Department for Business, Energy and Industrial Strategy (BEIS) argued the public interest would be harmed by their release.
Insurance Europe also reported that a limited number of insurers had taken part in field testing of the new IFRS. It went on to claim that the IASB had not conducted a cost-benefit analysis of the new standard.
The IFRS 17 standard, which the IASB published in May this year, will take effect from 1 January 2021. It represents a major leap for IFRS, which had until recently lacked a globally applicable accounting rulebook.
IPE has contacted both Insurance Europe and the UK’s Association of British Insurers (ABI) for comment.
Insurance Europe referred IPE to an earlier statement in which it set out its concerns about the IASB’s communications and outreach.
Insurance Europe’s concerns centred on the assessment of onerous contracts and the requirement to group together only contracts issued within the same year. The trade body also objected to restating comparatives when applying the new insurance standard for the first time.
The group said it had “simple proposals” to address each of the concerns.
Meanwhile, other documents also revealed that the ABI broadly shared the concerns of its counterpart in Europe.
In an email dated 21 April 2017, an unnamed ABI official stated: “I can assure you that the letter does generally reflect the position of UK insurance as well as other European insurance… I would also like to take the opportunity to stress just how difficult it is to carry out such an assessment yet because the IFRS text keeps changing and we won’t know what it actually says until it is published.”
In a further heavily redacted exchange dated 13 April, an unnamed ABI correspondent stated that addressing the industry’s significant concerns about the new standard would prove to be challenging.
The writer also raised the concern that EFRAG – the body responsible for determining whether an accounting standard is suitable for endorsement within the European Union – could rule that the new standard did not meet its criteria.
Finally, the emails confirmed that the UK government was still exploring a range of options with regard to directly applicable EU legislation in the light of last year’s Brexit vote.
BEIS officials said they would ensure that the ABI’s concerns about IFRS 17 were “at the heart of our considerations”.
The release of the documents comes as the IASB gears up to support insurers in their battle to implement the new standard.
At the inaugural meeting of the board’s transition support group last week IASB member Martin Edelmann said: “Implementation of IFRS 17 is a challenge and we all acknowledge this.”
He added that he was “confident” the board could deliver on its objective of supporting implementation of the new standard.
Meanwhile, EFRAG has called for European insurance companies to take part in a case study linked to its endorsement advice to the European Commission on IFRS 17. Interested parties have until 8 December 2017 to express an interest in taking part.
EFRAG said its impact assessment would include full consideration of the cost benefits of the new standard, as well as an evaluation of its broader economic impact.
The EU adviser said that a detailed case study comprising input from a sample of European insurers on the anticipated impact of IFRS 17 would form an integral part its advice.