The International Accounting Standards Board (IASB) has voted to delay the implementation of IFRS 17 for one year to 1 January 2022.
The accounting standard for insurance contracts was originally scheduled to take effect in January 2021, but there have been widespread calls by trade bodies around the world to delay the standard for two years.
Board members also agreed that insurers could postpone by another year the implementation of IFRS 9, the accounting standard for financial instruments, to coincide with the implementation of IFRS 17.
The IASB decided to discuss the possibility of a one-year deferral because some stakeholders felt a one-year delay could be helpful but a longer delay would be disruptive and could increase costs without a corresponding benefit.
The proposed deferral is subject to public consultation, which is expected next year, according to the IASB. It added: "The Board expects to discuss the merits of potential amendments to the standard during its December meeting."
Martin Sarjeant, global solutions leader for insurance at FIS, welcomed the announcement adding the delay was necessary to implement IFRS 17 in a timely and robust manner.
“It is hoped that the additional time will further allow companies to move beyond minimum compliance to a true value-added approach for the business hence unlocking the value of their implementation investment,” he said.
“What’s very important is that insurers do not lay down tools and catch a breath or deprioritise IFRS 17 on the back of this delay else they just risk putting themselves in the same position they are in today but a year down the line.”
Experts told InsuranceERM last month many insurers would continue with their projects even if a delay was granted.
Alex Bertolotti, global IFRS 17 leader at PwC, agreed, saying: “If there is a one-year delay we don’t expect to see any relaxation of any of the projects. A one-year delay really only just de-risks what are at the moment still quite risky projects because there is so much to do.”
He told InsuranceERM some smaller insurers around the world, with the exception of those in the Middle East, have not even started their implementation projects.
“It depends on the territory basis but generally, larger companies are well on their way. Medium-sized companies have started [their projects] but nowhere near finished and smaller companies have not really started yet.”
Last month Insurance Europe called for a two-year delay. Commenting on today's announcement, Olav Jones, deputy director general of Insurance Europe, said: “While it is good that the IASB Board has — at last — recognised the need to consider improvements and a delay to IFRS 17, as well as adjusting the timing of IFRS 9 to keep it aligned, one year is simply not enough time to both fix the problems with IFRS 17 and to give insurers enough time to implement the standard properly.”