To assess the impact of what is billed as the “biggest shake-up in insurance reporting” for decades, the Philippine Insurers and Reinsurers Association (PIRA) has partnered with PriceWaterhouseCoopers (PwC) and the Insurance Commission for a study on the International Financial Reporting Standard (IFRS) 17.
At a kickoff event at the Asian Institute of Management recently, PIRA Chairman Mr. Allan R. Santos called on all PIRA members to support the impact assessment study aimed at identifying ways to help non-life insurance companies transition to IFRS17.
The IFRS17 is a new standard released by the International Accounting Standards Board (IASB) in 2017 and will be effective January 1, 2021 with prior year comparative reporting required.
It requires measuring insurance contract liabilities based on certain “building blocks” such as discounted, probability-weighted estimates of cash flows, risk adjustment to address the uncertainty of cash flow estimates, and contractual service margin which is the unearned profit of the contract.
PwC Senior Partner Ms. Imelda Dela Vega Mangundaya told PIRA members during the kickoff that the industry will have to revisit their rules and how they handle their books.
“The Insurance Commission itself may have to revisit its rules under insurance industry ranking and the Amended Risk-Based Capital Framework,” she said.
“For industry ranking, the income statement will no longer reflect gross premiums written but will be replaced by insurance service results, representing earned income. For capital requirement, the one-time equity effect of transition adjustment may trigger capital build-up plan or capital call from shareholders to comply with RBC2. Clarified guidance by the IC may be essential in this changing insurance landscape,” she explained.