By Huw Jones
LONDON – Britain’s new body overseeing accounting rules following Brexit said it was braced for a “lot of noise” from the 1.7 trillion pound ($2.33 trillion) insurance sector about measures to increase transparency of financial positions and performance.
Departure from the European Union meant Britain had to set up its own body to endorse international accounting rules, a task previously undertaken by Brussels, with the first big test next month involving insurance accounting rule IFRS 17.
Pauline Wallace, a 30-year veteran in accounting who is interim chair of the UK Endorsement Board (UKEB), said the body will consult in November on endorsing the rule which comes into force globally in January 2023.
“We are running against quite a tight deadline,” Wallace told Reuters.
The UKEB must take into account the long-term impact of an accounting rule on the UK economy and its competitiveness compared with Europe and elsewhere, with government keen for Britain to bolster its attractiveness as a global investment centre following Brexit.
IFRS rules are written by the International Accounting Standards Board (IASB) for use in over 140 jurisdictions and are endorsed at the national level for use.
IFRS 17 represents one of the biggest changes for insurers in decades, shining a light into a “black box” of balance sheets whose opaqueness has put off many investors.
Wallace said the consultation will ask if IFRS 17 should be applied as written by the IASB, adding that she has not heard any calls for major ‘carve outs’.
“We can also not endorse. That is the nuclear option. I don’t think that’s anything anybody wants,” Wallace said.
She expects a “lot of noise” from industry, especially over the treatment of with-profits funds.
“The insurance industry is very good at making their views known. Insurance companies are not the only stakeholders in this. Investors are very keen to see better accounting in insurance,” she told Reuters.
The Association of British Insurers said it had no comment on IFRS 17 at this stage.
Following heavy lobbying from Europe’s insurance sector, the EU is putting some contracts into shorter time brackets, a key demand from insurers in southern Europe.
Wallace said she was not hearing calls for a similar move in the UK.