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LONDON–(BUSINESS WIRE)–IFRS 17 was effectively re-opened for the International Accounting Standards Board (IASB) to consider limited changes in November 2018, despite its publication in the previous year as a final standard. Stakeholders now have until 25 September to respond to the June 2019 Exposure Draft, “Amendments to IFRS 17”, in which the IASB published their proposals.

In a new Best’s Commentary, “IFRS 17 Update ‒ Changes Still Possible”, AM Best highlights some uncertainties yet to be tackled by the amendments. It notes that although the IASB’s proposed changes do not modify the nature of IFRS 17, some would have quite material effects.

Non-life insurers (including reinsurers and the Lloyd’s market) remain uncertain over whether to adopt the Premium Allocation Approach or Building Block Approach for their accounts. Tony Silverman, associate director, analytics, said: “Even though it is now over two years since the ‘original’ publication of the final standard, there remains a spread of views and expectations as to which accounting approach under IFRS 17 will be used by large parts of the reinsurance industry. In AM Best’s view, this is unsatisfactory as it may lessen comparability between insurers by leading to them using different approaches to report the same type of business.”

One of the IASB’s proposals is to spread policy acquisition costs over expected renewals despite such renewals being non-contractual future sales. AM Best states in the commentary that customer “stickiness” is an important management measure in many industries, but that does not normally mean primary accounts should consider non-contractual future sales. Silverman adds: “AM Best would be surprised if users favoured the change given its inherent departure from the normal function of primary accounts.”

The published draft response of EFRAG — an EU body whose approval is essential for the standard’s adoption by EU insurers — to the Exposure Draft makes a case to have no annual cohorts for a significant portion of participating life business. AM Best believes this would, for the affected business, turn IFRS 17 into something more akin to Embedded Value (EV) reporting. EV reporting has lost credibility with external users and it is AM Best’s opinion that IFRS 17 would immediately suffer from similar failings if EFRAG’s suggestion were to gain traction. Silverman also notes that: “The cohort requirement of IFRS 17 addresses a key weakness of previous value-oriented reporting frameworks. Its loss for a large portion of participating business would be a fundamental change that would be disappointing for external users of financial reporting.”

To access the full copy of this special report, please visit

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Tony Silverman

Associate Director, Analytics

+44 20 7397 0264

Edem Kuenyehia

Director, Market Development & Communications

+44 20 7397 0280

Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644