IFRS 17 Accounting Standards for Insurance

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 have lead to some proposed changes including a delay in the effective date until 2022.

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. Since the release of the final standard, 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.

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 can be leveraged as we expand our offering to support full IFRS functionality. Systems development work is progressing well, with various components already completed. 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 effective date of January 2022 for the IFRS 17 standard, we anticipate clients will want substantial delivery of AXIS functionality by early 2020. 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.