Willis Towers Watson (WTW) has recommended that the International Accounting Standards Board (IASB) make several additional amendments to IFRS 17.
30 SEP 2019 | CHRIS SEEKINGS
The multinational insurance company welcomed changes proposed by the IASB in an exposure draft last June, but argued that these do not go far enough.
WTW said that further accounting amendments are needed for reinsurance contracts, and that more must be done to ensure adoption of the modified retrospective approach (MRA).
"We commend the IASB for reopening and updating the standard to address key concerns brought forward by those impacted," WTW managing director, Serhat Guven, said.
"The amendments, with some additional enhancements, will result in a better IFRS 17 standard that more closely reflects how companies underwrite and manage insurance risk."
Based on an in-depth review, WTW said that the definition for reinsurance that provides proportionate coverage is too narrow, and would exclude a number of common reinsurance types.
It also argued that the option of reinsurance to mitigate financial risk should be extended to permit assets held, in addition to derivatives and reinsurance contracts.
Moreover, WTW said that amendments proposed to the full retrospective approach (FRA) to implement the MRA are too "narrow and restrictive".
It warned that this could result in a significant amount of business being restated on the fair value approach (FVA) at transition, which is not equivalent to the FRA or MRA.
The firm proposed additional modifications and flexibility to ensure broader adoption of the MRA, including making these requirements more principles-based.
"The amendments proposed by the IASB will cause additional work to implement, given that insurers have already spent considerable time and effort," Serhat continued.
"We continue to work with clients globally in help with the implementation of IFRS 17."
Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession