The UK Endorsement Board (UKEB) has approved the adoption of the International Accounting Standards Board’s (IASB) IFRS 17 Insurance Contracts for use by UK companies.
It is the first major standard adopted by the UKEB, which is responsible for the endorsement and adoption of international accounting standards following the UK’s departure from the EU.
After considering the statutory criteria for adoption, the body said it was satisfied that “IFRS 17 meets them all”. This comes after a consultation with stakeholders closed in February.
The standard is effective from 1 January 2023, and is intended to improve international comparability of insurance contracts, with implementation expected to cost insurers up to $20bn (£16bn) globally.
“Overall, the UKEB considers that the adoption of IFRS 17 will lead to substantial improvements in financial reporting for insurance contracts and that its application will be conducive to the long-term public good in the UK,” said Pauline Wallace, chair of the UKEB.
“The adoption of IFRS 17 marks a major milestone in the work of the UKEB during its first year of operation. The UKEB looks forward to continuing to engage with UK stakeholders during the implementation and initial application of the standard.”
IFRS 17 has been subject to several amendments and delays in recent years, with insurers having highlighted a range of concerns with the standard, such as measurements of discount rates.
Meanwhile, a survey carried out by The Actuary and Moody’s Analytics in the second half of last year found that concerns remain in areas such as reinsurance, coverage units and interim financial reporting.
The Association of British Insurers' (ABI) head of prudential regulation, David Otudeko, welcomed the UKEB's endorsement of IFRS 17, and urged it to now focus on ensuring the UK’s voice is heard in resolving outstanding issues.
“This includes the current live issue relating to the quantification of benefits provided under an annuity contract, which is a material issue for UK annuity providers and was the subject of a recent IFRS interpretations committee tentative agenda decision,” he continued.
“We urge the UKEB as part of its remit for international influencing to engage with the IASB to secure a positive outcome for UK annuity providers.”
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Author: Chris Seekings