THE Insurance Commission (IC) is confident that the local insurance industry will implement measures to comply with the International Financial Reporting Standard (IFRS) 17 on or before 2023, which will help the Philippine insurance industry comply with global standards.
At the 15th Insurance Summit at the Dusit Thani Hotel in Makati City on Wednesday, IC Deputy Commissioner George S. Ongkeko Jr. said the commission is hopeful that local players will complete their compliance with IFRS 17 four years from now, noting that such will not only improve their accounting and actuarial processes, but also their data gathering and storing capabilities.
“IFRS 17 is really a monster of a standard. I hope the industry as a whole would really move forward from taking seminars to really looking at systems to help them by 2023. The commission actually encourages the companies to move ahead in terms of their preparations for IFRS 17 just because it’s a standard that not only encompasses actuarial and accounting [systems] but [also] data gathering, structure, software, hardware. It’s very much in-depth,” Ongkeko said.
He explained that the IC has created a separate group within the commission to survey local insurance companies to check the changes in their systems in line with their compliance with the IFRS 17.
“The commissioner has already instructed a certain team in the IC to have a survey in terms of progress in the IFRS, and one key item we would like to indicate in the survey is whether there is already a system that is being bidded out,” he added.
Multinational companies are seen to take the lead in implementing the IFRS 17, as they have regional support.
“I guess most multinationals will implement globally so they will be the lead in so far as implementing, that will be a good blueprint for the local companies to follow suit,” Ongkeko said.
For the Philippine Life Insurance Association (Plia), the deferment to 2023 of the shift to IFRS 17—from the original 2021 timeline—is beneficial for local players as implementation requires hefty investments from the companies on top of the increase in minimum net-worth requirement asked of local insurance companies.
“Of course, for the multinational companies, this will be dictated by the global decision makers, and for most cases I’ve seen, there is really no delay in the implementation for the multinational. But what is of concern for the industry association would be the smaller companies,” explained Plia Board Secretary Reynaldo C. Centeno.
Centeno added that implementation of the IFRS 17 will significantly change the revenue recognition and income recognition of insurance companies, among others. As such, discussions with tax authorities should be included in line with the preparations for the implementation of the financial standard.
“I’m not sure whether we have actually involved already the tax authorities in all the talks because the IFRS 17 will significantly change all the revenue recognition, income recognition, but we have a tax code that is primarily based on the old setup. And everybody in the life-[insurance] industry is aware [of] what happened—we’ve just shifted in valuation requirement from net premium level to cost gross premium valuation. There was a lot of going back and forth with the BIR [Bureau of Internal Revenue],” said Centeno, who is also the president and CEO of Generali Life Assurance Philippines Inc.
In January this year, Insurance Commissioner Dennis B. Funa said that insurance players are not being prevented from adopting the IFRS 17 ahead of the deferment of the commission for its implementation in 2023.
It was earlier reported that the IC deferred the effectivity date for the shift to the IFRS 17 for life and nonlife insurance companies in the country to January 1, 2023, from the original January 1, 2021, proposed by the International Accounting Standards Board (IASB).
According to the IC, the implementation of IFRS 17 was fraught with challenges such as a tight timeline, determination of model, lack of clarity, resources and expertise, tight budget, report and disclosure, and lack of information-technology (IT) infrastructure.
Funa noted that other countries and territories also have varying implementing periods for IFRS 17 in their jurisdiction. China, Hong Kong, Japan, Macau, Taiwan and the United Arab Emirates are still assessing the feasibility of implementing the IFRS 17, he said.
The IFRS is a set of accounting standards recognized by at least 166 countries, including the Philippines, and provides a guide on how particular types of transactions and other events should be reported in the financial statements.
The new system supersedes IFRS 4 Insurance Contracts, which establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued.
