The new IFRS standard for insurance contracts will require a lot of attention in order to have an accurately performing IFRS reporting process ready in time.

The IFRS project for Insurance Contracts has gone a long way, but finally the IFRS 17 Standard has been published and will be effective from 1 January 2023.

Initiation

The IASB predecessor, the IASC, set up a Steering Committee in 1997 to carry out the initial work to develop a fair value based accounting measurement for insurance contracts.

IFRS 4

Phase I of IFRS 4 Insurance Contracts was issued in March 2004 and became effective as of January 2005 when IFRS reporting became mandatory for listed companies in Europe. Phase I was intended only as an interim standard which allowed insurers to continue to use various local accounting practices pending the completion of a comprehensive standard. It did, however, specify that contracts without any transfer of insurance risk should be considered as financial instruments (falling under IAS39) and introduced an additional Liability Adequacy Test to check the accounting figures against the underlying economic situation.

IFRS 17

In 2007, a first discussion paper was issued to set the ultimate accounting measurement for insurance contracts. This was followed by an exposure draft in 2010 and a revised exposure draft in 2013, which readdressed some of the most controversial topics. In this period, the original concept of “fair value” was refined to “exit value” first and then to “fulfilment value”. A final Standard called IFRS 17 was published in May 2017 with a transition period of over three years and an effective date of 1 January 2021.