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IFRS 17 Versicherungsverträge – IASB veröffentlicht finalen Standard

Das IASB hat am 18. Mai 2017 den neuen Rechnungslegungsstandard für Versicherungsverträge – IFRS 17 Insurance Contracts – veröffentlicht. Der Standard beinhaltet Vorschriften zur bilanziellen Abbildung von Versicherungsverträgen im IFRS-Abschluss. IFRS 17 ist auf die Geschäftsjahre, die am oder nach dem 1. Januar 2021 beginnen, verpflichtend anzuwenden. Er ersetzt die Vorschriften des IFRS 4 Insurance Contracts.

Mit der Veröffentlichung der finalen Fassung des IFRS 17 Insurance Contracts endet ein jahrzehntelanges Projekt zur Entwicklung eines einheitlichen Standards für die Bilanzierung von Versicherungsverträgen. IFRS 17 enthält nunmehr konsistente Bilanzierungsprinzipien für Versicherungsverträge, die für mehr Transparenz und Vergleichbarkeit von Abschlüssen innerhalb der Versicherungsbranche sowie industrieübergreifend (z.B. im Vergleich mit Abschlüssen von Banken) sorgen sollen. Der Schwerpunkt der Neuregelung liegt auf der Bewertung der versicherungstechnischen Rückstellung (und Vermögenswerte), der periodengerechten Erfassung von Umsatzerlösen aus Versicherungsverträgen sowie der umfassenden Berichterstattung im Anhang.

Der Anwendungsbereich des IFRS 17 umfasst begebene Versicherungsverträge (insurance contracts issued) sowie aktive und passive Rückversicherungsverträge. Zudem fallen Kapitalanlageverträge mit ermessensabhängiger Überschussbeteiligung (investment contracts with a discretionary participation feature) in den Anwendungsbereich des IFRS 17, sofern das bilanzierende Unternehmen auch Versicherungsverträge begibt.

Eine vorzeitige Anwendung des IFRS 17 ist nur bei gleichzeitiger Anwendung von IFRS 9 und IFRS 15 zulässig und hat grundsätzlich retrospektiv zu erfolgen. IFRS 17 geht nun in das EU-Endorsement-Verfahren ein, die EFRAG-Stellungnahme wird in Q3 2018 erwartet. Vor dem Hintergrund der Komplexität des neuen Standards und des vergleichsweise kurzen Implementierungshorizonts, steht die Versicherungsbranche vor einem straffen Implementierungsprogramm.

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IASB Meeting on 22 February 2017

Highlights on Insurance Contracts

At the February 2017 meeting, the IASB voted on a number of sweep issues relating to the proposed insurance contracts standard (the ‘draft Standard’ or ‘IFRS 17’).

The IASB decided to recognise against the contractual service margin (CSM) all changes in estimates of future cash flows arising from non-financial risks under the general model as well as those arising from non-financial risks (and not relating to the underlying items) under the variable fee approach (VFA).

The IASB decided to provide an exemption from the requirement to separately group contracts that fall into different groups because law or regulation constrains an entity’s ability to set a different price or level of benefits for policyholders with different characteristics.

The IASB confirmed that there are no remaining questions that they would like the Staff to consider at a future meeting. The Staff will continue drafting IFRS 17 and the IASB expects to issue the standard in May 2017.

 

Weitere Änderungen an IFRS 17 Insurance Contracts auf der Agenda

Für das IASB Board Meeting am 22. und 23. Februar 2017 empfiehlt das IASB Staff weitere Änderungen an der aktuellen Entwurfsfassung von IFRS 17, insbesondere in Bezug auf das Unlocking der CSM sowie die Anforderungen an die Gruppenbildung von Versicherungsverträgen.

Die Agenda Papiere fassen die Erkenntnisse aus der externen redaktionellen Durchsicht (external editorial review) des aktuellen Entwurfs von IFRS 17 zusammen – dem „second pre-ballot draft of IFRS 17“ – und beinhalten folgende Aspekte:

In Agenda Papier 2A Änderungen der vertraglichen Service Marge diskutiert das IASB Staff erneut, für welche Sachverhalte ein Unlocking der CSM erfolgen soll. Dies beinhaltet unter anderem den Vorschlag, alle Schätzungsänderungen in Bezug auf den Barwert der künftigen Zahlungsströme aus nicht-finanziellen Risiken gegen die CSM zu erfassen, sowie den Vorschlag zur Änderung der Definition des Begriffs Experience Adjustment.

Agenda Papier 2B Enge Ausnahme für eine Vertragskohorte, deren Preisbildung regulatorischer Bindung unterliegt befasst sich mit einer eng begrenzten Ausnahme von den Anforderungen an die Gruppenbildung von Versicherungsverträgen. Das IASB Staff sieht eine solche Ausnahme allenfalls dann als gerechtfertigt an, wenn Versicherungsverträge nur deshalb in unterschiedliche Gruppen fallen würden, weil gesetzliche oder regulatorische Auflagen das Versicherungsunternehmen praktisch darin beschränken, für ein Versicherungsnehmerkollektiv (set of policyholders) mit unterschiedlichen Eigenschaften eine unterschiedliche Preisbildung, oder Nutzengewährung, vorzunehmen. In diesem Fall sollen die Verträge in eine Gruppe zusammengefasst werden dürfen.

Papier 2C Antworten auf die externe redaktionelle Durchsicht fasst zahlreiche weitere Ergebnisse aus der externen redaktionellen Durchsicht zusammen und adressiert kleinere Themen, darunter:

  1. Den Vorschlag für Verträge mit mutualisation, die Anforderung aufrechtzuerhalten, keine Verträge zu aggregieren, die mehr als ein Jahr auseinanderliegen. Ferner die Klarstellung wie die Anforderung der Gruppenbildung nur für Versicherungsverträge, die höchstens ein Jahr auseinanderliegen, auf Verträge mit mutualisation anzuwenden sind. Der finale Standard wird keine Definition von mutualisation enthalten.
  2. Es sollte klargestellt werden, dass das Profitabilitätskriterium zur Aggregierung von Verträgen auf Basis eines Vertragskollektivs (set of contracts) anstelle eines einzelnen Vertrags beurteilt werden kann, wenn angemessene und belastbare Informationen vorliegen, wobei der Ausdruck “set of contracts” voraussichtlich nicht definiert werden wird.
  3. Bei Anwendung des PAA sollte die Beurteilung, ob belastende Verträge vorliegen (onerous contract test) auf Gruppenebene vorgenommen werden. In Bezug auf das Approximations-Kriterium als Anwendungsvoraussetzung für den PAA, ist “Approximation” aus der Konzern-Perspektive (Bewertung auf Konzernebene) zu beurteilen.
  4. Den Vorschlag, das Locking-in des Diskontierungszinssatzes für die CSM im Abschlusszeitpunkt aufrechtzuerhalten.
  5. Den Vorschlag, den VFA nicht auf alle Verträge auszuweiten, unter denen kapitalanlagebezogene Dienstleistungen erbracht werden.

Auf der Grundlage der Entscheidungen, die das IASB zu den Agenda Papieren am 22./23. Februar trifft, wird das IASB Staff IFRS 17 weiter ausarbeiten. Die Veröffentlichung von IFRS 17 wird im Mai 2017 erwartet.

More flexibility in the application of IFRS 9 – IASB publishes an amendment to IFRS 4

On 12 September 2016, the International Accounting Standards Board (IASB) published an amendment to IFRS 4, ‘Insurance contracts’. This addresses the concerns of insurance companies about the different effective dates of IFRS 9, ‘Financial instruments’, and the forthcoming new insurance contracts standard. The amendment to IFRS 4 provides two different solutions for insurance companies: a temporary exemption from IFRS 9 for entities that meet specific requirements (applied at the reporting entity level); and the ‘overlay approach’. Both approaches are optional.

IFRS 4 (including the amendments that have now been issued) will be superseded by the forthcoming new insurance contracts standard. Accordingly, both the temporary exemption and the ‘overlay approach’ are expected to cease to be applicable when the new insurance standard becomes effective.

Temporary exemption from applying IFRS 9

For annual periods beginning before 1 January 2021, the amendment to IFRS 4 allows insurers to continue to apply IAS 39, ‘Financial Instruments: Recognition and measurement’, instead of adopting IFRS 9, if their activities are ‘predominantly connected with insurance’. The exemption can only be applied at the level of the reporting entity. To assess whether activities are ‘predominantly connected with insurance’, two tests have to be performed. Only if both tests are passed are an insurer’s activities considered to be predominantly connected with insurance.

First, an insurer assesses whether the carrying amount of its liabilities arising from contracts within IFRS 4’s scope is significant, compared to the total carrying amount of all of its liabilities.

Secondly, the insurer compares the total carrying amount of its liabilities connected with insurance with the total carrying amount of all of its liabilities. In addition to liabilities arising directly from contracts within IFRS 4’s scope, liabilities connected with insurance include

  • non-derivative investment contract liabilities measured at fair value through profit or loss applying IAS 39, and
  • liabilities that arise because the insurer issues, or fulfils obligations arising from, those insurance and non-derivative investment contracts.

The second test is passed if the resulting percentage is either: greater than 90%; or if it is less than or equal to 90% but greater than 80%, the insurer is not engaged in a significant activity unconnected with insurance.

The assessment is made, based on the carrying amounts as at the annual reporting date that immediately precedes 1 April 2016. Under certain circumstances, a reassessment is required or permitted.

Overlay approach

Under IFRS 9, certain financial assets have to be measured at fair value through profit or loss; whereas, under IFRS 4, the related liabilities from insurance contracts are often measured on a cost basis. This mismatch creates volatility in profit or loss. By using the ‘overlay approach’, the effect is eliminated for certain eligible financial assets. For these financial assets, an insurer is permitted to reclassify – from profit or loss to other comprehensive income – the difference between the amount that is reported in profit or loss under IFRS 9 and the amount that would have been reported in profit or loss under IAS 39.

Financial assets are eligible for designation for the ‘overlay approach’ if they are measured at fair value through profit or loss under IFRS 9, but not so measured under IAS 39. In addition, the asset cannot be held in respect of an activity that is unconnected with contracts within IFRS 4’s scope. If a designated financial asset no longer meets the eligibility criteria (for example, because it is transferred so that it is now held in respect of an entity’s banking activities or because the entity ceases to be an insurer), it shall be de-designated; in that case, any balance accumulated in other comprehensive income relating to this financial asset is reclassified to profit or loss.

The ‘overlay approach’ is applied retrospectively. Accordingly, the difference between the fair value of the designated financial assets and its carrying amount is recognised as an adjustment to the opening balance of accumulated other comprehensive income. Following the same logic, if the entity stops using the overlay approach, it adjusts the opening balance of retained earnings for the balance of accumulated other comprehensive income.

Impact

Both the temporary exemption and the ‘overlay approach’ allow entities to avoid temporary volatility in profit or loss that might result from adopting IFRS 9 before the forthcoming new insurance contracts standard. Furthermore, by using the temporary exemption, an entity does not have to implement two sets of major accounting changes within a short period, and it can take into account the effects of the new insurance standard when first applying the classification and measurement requirements of IFRS 9.

Groups that contain insurance subsidiaries should be aware that the temporary exemption only applies at the level of the reporting entity. So, unless the whole group is eligible for the temporary exemption, whilst an eligible insurance subsidiary can continue to apply IAS 39 in its individual financial statements, the subsidiary will have to prepare IFRS 9 information for consolidation purposes. Furthermore, it should be noted that, under both approaches, significant additional disclosures are required.

IFRS 9 temporary exemption

IFRS 9 temporary exemption: aligning the scope for fair value disclosures with that for credit risk disclosures

Highlights from the IASB Meeting on 18 July 2016

At the July 2016 meeting the IASB voted on a sweep issue relating to the amendments to IFRS 4 Insurance Contracts (IFRS 4), Applying IFRS 9 Financial Instruments (IFRS 9) with IFRS 4.

All Board members voted in favour of an amendment to the previously made tentative decision about the scope of fair value disclosures when an entity applies the temporary exemption from IFRS 9. Under the revised decision, an entity would disclose the fair value at the end of the reporting period and the change in the fair value during the reporting period for the following two groups of financial assets separately:

  • Financial assets that pass the ‘solely principal and interest’ (SPPI) test, excluding those held for trading or managed on a fair value basis; and
  • any financial assets that either (1) fail SPPI test or (2) are held for trading or managed on a fair value basis.

This change aligns the required groupings for fair value disclosures with those for the credit risk disclosures under the temporary exemption.

The previous tentative decision would have required separate fair value disclosures for assets held for trading or managed on a fair value basis that meet the SPPI test from those that failed the SPPI test. The IASB members agreed to the revised simplified disclosures, observing that there is no need to look at the characteristics of cash flows when assets are managed on a fair value basis and that they are more consistent with the disclosures required by IFRS 9. Entities applying IFRS 9 are not required to separately disclose the fair value just for financial assets that have cash flows that are not SPPI. This is because an entity applying IFRS 9 is not required to perform the SPPI assessment if it first determines that the assets are held in an ‘other’ business model.

The Board expects to issue final amendments to IFRS 4 in September 2016.

IASB confirms amendments to IFRS 4

Highlights from the IASB meeting on 17 May 2016

At the May 2016 meeting the IASB unanimously agreed to grant the Staff permission to begin the balloting process for the proposed amendments to IFRS 4 Insurance Contracts (IFRS 4), Applying IFRS 9 Financial Instruments (IFRS 9) with IFRS 4. One IASB member intends to dissent from the publication of the amendments because she believes that the temporary exemption results in a significant loss of information compare to application of IFRS 9 and that the overlay approach was sufficient to address concerns raised by preparers. The Board expects to issue final amendments to IFRS 4 in September 2016.

The Board decided to require reassessment of eligibility for the temporary exemption from applying IFRS 9 if there has been a significant demonstrable change in the corporate structure that could result in a change in the predominant activities. The Board also decided to permit the reassessment if an entity was not eligible for the temporary exemption and there was a significant demonstrable change before 1 January 2018 that resulted in a change in the predominant activities.

For the temporary exemption the Board confirmed the fixed expiry date of 1 January 2021 and for the overlay approach the Board confirmed having no fixed expiry date.

The Board decided to permit first-time adopters of IFRS to apply both the temporary exemption and the overlay approach. The Board also decided to permit relief from applying consistent accounting policies in relation to the temporary exemption for investors and investees when the equity method is used.

Highlights from the IASB Meeting in April on Insurance Contracts

At the meeting on 19 April 2016 the IASB continued its deliberations of the proposed amendments to IFRS 4 Insurance Contracts (IFRS 4), Applying IFRS 9 Financial Instruments (IFRS 9) with IFRS 4.

The Board decided to revise the eligibility criteria for meeting the temporary exemption from applying IFRS 9 (‘the temporary exemption’), which is expected to expand the population of entities eligible for it. The Board also changed the assessment date for eligibility to an earlier period than the initial application date of IFRS 9.

The Board also made decisions relating to application, presentation and disclosure of the overlay approach, disclosures relating to the application of the temporary exemption, and disclosure of other information when the temporary exemption is applied.

At the IASB meeting in May the Board plans to complete its deliberations relating to the proposed amendments to IFRS 4, including the expiry date and whether first time adopters should be prohibited from applying the temporary exemption or overlay approaches. The Board expects to be in a position to issue final amendments to IFRS 4 in September 2016.

Insurance Update from the IASB Meeting on 15 March 2016

Highlights

At the March meeting the IASB discussed the proposed amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts. The Staff summarised the results from its comment letter analysis and outreach, including feedback received from users of financial statements. The Board also made a number of key decisions that set the direction for its redeliberations of the proposed amendments to IFRS 4 including the following decisions to confirm that:

  • the eligibility assessment for the temporary exemption is performed at ‘the reporting entity level’ only;
  • there should be a temporary exemption and an overlay approach and that both approaches should be optional; and
  • the temporary exemption has a fixed expiry date.

At IASB meetings in April and in May the Board plans to complete its redeliberations of the proposed amendments to IFRS 4 to be in a position to issue final amendments to IFRS 4 in September 2016.

Highlights from the IASB Meeting in February on Insurance Contracts

At the meeting on 16 February 2016 the IASB unanimously agreed to grant the staff permission to begin the balloting process for the forthcoming new insurance contracts standard (the ‘Standard’). None of the IASB members intends to dissent from the publication of the Standard.

The Chairman indicated that drafting of the Standard may take nine months so the Standard is expected to be issued around the end of 2016. During the drafting of the Standard the IASB plans to issue progress reports highlighting difficult issues.
The Board also plans to issue educational materials on key issues such as the scope of the variable fee approach and use of discretion.
The IASB will consider the need for future Board discussion of issues that may arise during the drafting process. The Board is expected to decide on the mandatory effective date of the Standard when the publication date is more certain.

IASB Meeting on 19-20 January 2016 on Insurance Contracts

Highlights

The IASB met on 19 and 20 January 2016 to discuss the level of aggregation of contracts for allocation of the contractual service margin (CSM) and losses from onerous contracts. They also discussed the definition of discretion in the context of participating contracts that follow the general model.

The IASB tentatively decided to require entities to group contracts to assess onerous contracts based on cash flows responding similarly to key risk drivers and similar expected profitability. The IASB did not vote on the specific wording for grouping of contracts for CSM allocation which will be addressed in drafting. The IASB did, however, vote in favour of a principle to permit grouping of homogeneous contracts and to provide clarification in the new insurance contracts standard (the Standard) on what acceptable and unacceptable groupings could be. The IASB voted to permit no exception on the level of aggregation for situations where regulation affects the pricing of contracts.

The IASB also discussed how an insurer should distinguish changes in discretionary cash flows that adjust the CSM from changes caused by market variables for participating contracts following the general model. The IASB tentatively decided to require entities to define discretion at the inception of each contract based on the promise the entity makes to its policyholders and agreed to provide examples in the Standard of what constitutes appropriate and inappropriate definitions of discretion.

The Staff expects in February 2016 to ask the IASB to review the due process steps undertaken in developing the Standard and ask for permission to begin the balloting process for the new insurance contracts standard. The Staff has not yet developed drafting timetable but they acknowledged the size and complexity of the Standard which may require long period for drafting. The Board is expected to consider the mandatory effective date of the Standard when the publication date is more certain.

Level of aggregation

Calculation of loss from onerous contracts

All Board members voted in favour of the Staff recommendation to require entities to assess onerous contracts on a portfolio basis, where a portfolio is defined as a group of contracts that

(1) have cash flows that an entity expects will respond in similar ways to key risk drivers in terms of amount and timing and

(2) have similar expected profitability.

The allocation of a contract to a portfolio should be made at inception of each contract and should not be reassessed thereafter.

Board members supported their preference for portfolio-based calculations of loss from onerous contracts by noting that a portfolio-based approach is closer to the way insurers see their business. In addition, their outreach has revealed that an individual contract level would not be operationally feasible.

A few Board members suggested that additional guidance is required for the word ‘similar’ used in Staff recommendations because it requires significant judgement and may result in significantly different outcomes depending on how the judgement is exercised.

The Board considered and rejected the use of ‘pricing’ instead of ‘profitability’ because they found ‘profitability’ to be more relevant for testing onerous contracts.

Allocation of CSM

12 out of 14 Board members voted in favour of a principle to permit grouping of homogeneous contracts for CSM allocation, provided the Standard gives further guidance on permissible criteria for aggregation. The IASB did not conclude what words should be used to describe the principle which will be addressed in drafting.

A few Board members questioned if the Board wants to keep the objective as allocation of CSM at the individual contract level. Ultimately, the Board vote seemed to indicate support for the individual contract level or a grouping of very homogeneous contracts (with indicators or criteria to be determined in the Staff’s drafting).

A few Board members expressed a preference for consistency in the aggregation requirements for measurement of all components of insurance contracts or at least for allocation of CSM and calculation of loss from onerous contracts. They believe this may be operationally simpler, reduce opportunities for earnings management and increase consistency and be more understandable. Other Board members considered that the level of aggregation should fit the purpose of measurement, for example, measurement of expected cash flows is done at a portfolio level, the risk adjustment should consider benefits from diversification of portfolios, while calculation of losses from onerous contracts should consider profitability. Different drivers of measurement result in the need for different aggregation levels.

A few Board members considered that aggregation based on cohorts with similar end of coverage period as initially proposed by Staff was inappropriate, because in practice profitability is often interdependent between different ‘generations’ of contracts. Some Board members suggested that lapses and underwriting of new contracts change the allocation of CSM between existing and new contracts.

A few Board members suggested that having examples on the appropriate and inappropriate level of aggregation in the Standard will help to better understand the principle.

Effect of price regulation

10 out of 14 Board members voted in favour of no exception to the level of aggregation when regulation affects the pricing of contracts.

A few Board members expressed support for no exception arguing that users would need the information about different profitability and level of risk and there are no exceptions for regulated activities in other IFRS. In addition, it would be difficult to define regulation and what kind of regulation would be in scope of the exception.

A few Board members supported the exception because it is wrong to book day one loss for some contracts and recognise higher profits in later periods for others because this does not reflect the economics of the contracts. In substance regulators require insurers to disregard certain risk in making pricing decisions and insurers do not have the option to turn down contracts with unfavourable pricing. Those terms are different from voluntary pricing decisions insurers make because, in cases of unfavourable terms in unregulated environments, insurers can decide not to issue the contract.

Discretion in participating contracts under the general model

The Board decided at previous meetings that changes in estimates of cash outflows that arise as a consequence of changes in market variables (for example changes in interest rates and asset gains or losses), and the corresponding change in discount rates, would be recognised in the Statement of Comprehensive Income. In contrast, changes in estimates that arise as a result of changes in the application of discretion, such as changes in the participation percentage for policyholder crediting, affect the consideration the entity will receive from the contract and adjust the CSM. At the January meeting the Board finalised the b) discussion on how to clarify what constitutes this discretion.

At the January meeting, all Board members voted in favour of the approach that would require an entity to define discretion at (inception of a contract based on the promise it makes to policyholders, and to use it to distinguish between the effect of changes in market variables and changes in discretion throughout the life of the contract.

The Board considered an example of a participating contract with a 2% guaranteed return to policyholders, with additional return at the entity’s discretion. At inception the entity expects to generate a 5% return on assets and to retain a spread of 0.5%. The entity invests in assets that return a fixed rate of 5% for two years.

One day after inception, interest rates fall to 1%. The entity then expects to give the policyholders 4.5% for two years, and then the guaranteed return of 2% thereafter.

The Staff considered the following options to define discretion:

(a) Promise to policyholder is a 4.5% return, entity uses its discretion to reduce that return, subject to the guarantee.

(b) Promise to policyholder is the return on assets it holds, less 0.5% spread, or the guaranteed return if higher. Entity has not used its discretion to change the promise.

(c) Promise to policyholder is a return based on market conditions, less 0.5% spread, or the guaranteed return if higher. Entity uses its discretion to increase the return to policyholders to 4.5% for the first two years.

Promise to policyholder is the guaranteed return of 2%. Additional return is the effect of discretion.

Based on this example presented at a prior Board meeting, Board members previously supported either option (b) or (c), but neither was viewed as ideal. At the January meeting, the new decision to require an entity to define discretion at inception of a contract based on the promise it makes to policyholders was viewed as a combination of both options (b) and (c) above. A few Board members noted that an entity’s promise to policyholders should determine how the discretion is defined. Depending on how the promise is defined the following definitions of the discretion at the inception of a contract can be acceptable (ignoring the effect of the guarantee):

  • Adjustments to the return from the underlying assets less a spread; or
  • Adjustments to the returns based on market conditions less a spread.

One Board member also suggested to include examples in the Standard, which would demonstrate acceptable and unacceptable definitions of discretion.