The International Accounting Standards Board (IASB) has agreed by a significant majority to discuss changing several key aspects of IFRS 17 insurance contracts.
At a meeting on Wednesday, the board proposed amending the accounting of proportionate reinsurance held in onerous insurance contracts to enable a more economic net outcome.
The IASB also suggested it would allow deferral of some insurance acquisition cash flows for newly issued contracts when there are related contract renewals expected.
Where resinsurance is held to mitigate financial risks using the general measurement model, the board said it could remove IFRS 17's "accounting mismatch" related to financial movements.
For insurance contracts containing insurance and investment components, the IASB proposed recognising both aspects for setting profit recognition patterns to help avoid distortions.
This comes after the board voted last November to delay the implementation date for IFRS 17 by one year to 1 January 2022 amid fears of "serious operational constraints" on insurers.
"We welcome the IASB's pragmatism," Willis Towers Watson (WLTW) senior director, Kamran Foroughi, said.
"The decisions will help ensure reinsurance remains attractive as a risk mitigation and funding activity, and avoid unintended consequences such as raising barriers for new entrants."
In preparing papers for this week's meeting, WLTW said the IASB indicated that it intends to issue a limited scope exposure draft on proposed IFRS 17 amendments by this summer.
It also plans to discuss a number of topics at meetings in February or March, including transition, comparative information, levels of aggregation and the scope of IFRS 17.
Faroughi said the IASB had tried to avoid an "overly prescriptive approach", and believes that the economic benefits from the changes outweigh any potential additional complexity.
"As a result, preparers will need to consider carefully how to interpret the standard," he continued. "In some case this may require significant additional analysis.
"Insurers should keep going with projects ensuring they are on track for a 2022 implementation, with the direction from the IASB becoming much clearer and only a small number of topics outstanding."
Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession