August 17, 2020 by David Gambrill
Three things in life are inevitable — death, taxes, and the transition to IFRS 17.
With the country now over what appears to be the worst of the COVID-19 pandemic thus far, Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), has issued new timelines related to federally regulated Canadian P&C insurance companies switching over to the new international financial reporting standards. International Financial Reporting Standards (IFRS) 17 represents an effort to harmonize international accounting standards so that there is a common global understanding of financial statements and terms.
OSFI’s latest IFRS 17 bulletin comes on the heels of a June 25, 2020 letter from the International Accounting Standards Board (IASB), which deferred to Jan. 1, 2023 the effective date to switch over to the IFRS 17 reporting standards. Based on the latest target date (which has been extended twice since 2018), OSFI is restarting its policy development work on IFRS 17.
First, Canada’s regulator has extended its Insurance Returns Public Consultation deadline to Aug. 31, 2020. Second, OSFI intends to update its capital testing guidelines — including the Minimal Capital Test (MCT) — in 2022. And third, the regulator announced that its IFRS 17 semi-annual progress reporting submission requirement will resume beginning Sept. 30, 2020.
“As the country takes steps towards economic recovery, we must now look ahead,” OSFI superintendent Jeremy Rudin said in a statement published online in mid-July. “That is why in the fall we plan to gradually restart OSFI’s policy development work. …
“More details will be available this summer and throughout the fall on how we will be resuming our policy work. This will include adjusting both the content and pace of what we do to reflect the new economic and operational environment. To aid us in determining this, we will seek input from the sectors we supervise to make the necessary adjustments.”
A complex new reporting standard, IFRS 17 will substantially alter the way P&C companies present their financial information. Without getting into too much detail, some in the Canadian P&C industry have suggested that one of the larger challenges in getting ready for IFRS 17 is that its reporting measures are more readily aligned with longer-term life insurance contracts than shorter, one-year P&C insurance contracts.
The new reporting measures will require companies to change policies and procedures on data collection, as noted in an April 2018 article in Canadian Underwriter authored by BDO.
“IFRS 17 is a complex standard and will require potentially new information or processes in order to comply,” as BDO noted in its article. “Insurers should look to this time of change as an opportunity to improve data management systems, processes, and the way the underlying business operates.”
COVID-19, the disease caused by the novel coronavirus, threw a monkey wrench into the timelines for preparation, which had initially been scheduled for implementation on Jan. 1, 2021. IABS extended that deadline to Jan. 1, 2022, and now the deadline has been extended to Jan. 1, 2023, to reflect the delays created by the global pandemic.
In late March, shortly after the World Health Organization declared the novel coronavirus to be a global pandemic, OSFI suspended:
Feature image courtesy of iStock.com/MicroStockHub