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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. 

Back­ground

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.