The IFRS 9 timer is ticking for insurers. Gail Tucker assesses how they should prepare ahead of the deadline.
IFRS 9 Financial Instruments is effective for annual periods beginning on or after 1 January 2018, although amendments to IFRS 4 Insurance Contracts will allow some insurers to defer application of IFRS 9 until 1 January 2021. Implementation of the standard will be challenging due to its interaction with the new insurance contracts standard (IFRS 17), expected to be issued in the second quarter of this year.
Insurers should be assessing now whether their activities are “predominantly connected with insurance” to qualify for the deferral of IFRS 9. This will involve comparing the liabilities from IFRS 4 contracts to total liabilities and considering whether there are any significant business activities not related to insurance. Man y
UK insurers should qualify for deferral but the assessment is at a group level and so some groups may not qualify. Insurers who do not qualify for deferral can use a new overlay approach or existing options in IFRS 4 to address accounting mismatches that arise from IFRS 9.