By Huw Jones
LONDON (Reuters) – Insurers from across the world have called for amendments and a two-year delay to a change in accounting rules aimed at increasing visibility of how they earn their money.
Nine national and regional insurance industry bodies from Europe, Canada, Korea, New Zealand, Australia and South Africa want the International Accounting Standards Board (IASB) to amend and delay its “IFRS 17” book-keeping rule by two years to January 2023.
Twenty years in the making, the rule seeks to make it easier for investors to compare how much insurers earn from policies by prising open a “black box” of opaque national practices. IASB rules are used in over 100 countries, though the United States has its own accounting standards.
The industry bodies said in a letter to the IASB that preparatory work has confirmed that a number of important issues need to be resolved to make the new rule practical.
“As a result, we strongly believe a two-year delay in the effective date of the standard is required,” the letter to IASB chair Hans Hoogervorst said.
“There is no expectation that a delay will result in insurers stopping or slowing their implementation project.”
The CFO Forum of chief financial officers from major European insurers like Allianz, Aviva, Generali and Axa has said the new rule leads to inconsistent reporting, and requirements that are unnecessarily complex.
Implementation costs range from 50 million euros to 320 million euros per CFO Forum member, it said, with ongoing operational costs expected to be significantly greater than for applying existing insurance book-keeping rules.
The IASB board will discuss staff reports about a potential delay and amendments next week, but no decision is expected at that time.
“In determining what amendments, if any, to make to IFRS 17, the board will need to balance the potential benefit of any amendments against the effect of an undue delay to a standard that is needed to address many inadequacies in the existing wide range of insurance accounting practices,” an IASB staff paper for the meeting said.
(Reporting by Huw Jones; Editing by Jan Harvey)