Submissions closed on 8 June 2022
Insurance Contracts in the Public Sector
Proposals to modify insurance accounting requirements for public sector entities
We sought feedback on proposals to modify some requirements in PBE IFRS 17 Insurance Contracts for application by public sector entities that issue insurance contracts. These proposals are relevant for Tier 1 and Tier 2 public sector public benefit entities.
For public sector entities that issue insurance contracts, the proposals mean they would apply the same new insurance accounting requirements that for-profit and not-for-profit entities will be applying for annual reporting periods beginning on or after 1 January 2023.
The aim of PBE IFRS 17 (which is aligned with IFRS 17 Insurance Contracts issued by the IASB) is to standardise insurance accounting globally to improve comparability and increase transparency, and to provide users of accounts with the information they need to meaningfully understand the insurer's financial position, performance, and risk exposure.
The modifications proposed in the Exposure Draft are:
- to amend the scope to include public sector entities;
- an exemption from sub-grouping onerous versus non-onerous insurance contracts at initial recognition;
- an exemption from sub-grouping contracts issued no more than a year apart;
- an amendment to the initial recognition requirements so that they do not depend on when contracts become onerous;
- guidance on coverage periods, which has consequences for assessing eligibility for the premium allocation approach in a public sector context;
- indicators for identifying the transactions to which PBE IFRS 17 should apply in a public sector context;
- guidance on determining the cash flows within the contract boundary; and
- requiring risk adjustments for non-financial risks in measuring insurance liabilities to be measured at a rebuttable 75% confidence level.
Thank you to everyone who provided feedback. Submissions have been uploaded below.
The feedback received was broadly supportive. We have heard that you support (a) an exemption from sub-grouping onerous versus non-onerous insurance contracts at initial recognition, (b) an exemption from sub-grouping contracts issued no more than a year apart and (c) an amendment to the initial recognition requirements so that they do not depend on when contracts become onerous.
The feedback on risk adjustments, guidance on coverage periods, indicators for identifying the transactions to which PBE IFRS 17 should apply in a public sector context and other suggestions are being considered in the development of the final Standard.