Insurance amendments

(1)

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Insurance

amendments

Proposed amendments to address

the impact of IFRS 9 on insurers

10 December 2015

(2)

The differing effective dates of IFRS 9

Financial Instruments

and the new

insurance contracts standard will have a

significant impact on insurers.

We encourage you to read our

New on the

Horizon

, assess the impact on your

business and participate in the debate.

(3)

“The proposal to allow a temporary exemption

from IFRS 9 increases the pressure to bring an

end to the insurance contracts project in the

short term.”

Insurance contracts project nears its end

Joachim Kölschbach,

KPMG’s global IFRS

insurance leader

(4)

What’s the issue?

Differing effective dates result in…

Temporary volatility

and accounting

mismatches

Two implementation

projects in a short period

and

2018

≥

2020

IFRS 9

Insurance

(5)

Proposed

(6)

The proposals

Temporary exemption

from applying IFRS 9

2018

≤

2021

Insurance

standard

IFRS 9

FVTPL under IFRS 9

Impact of changes

to FVTPL under

IFRS 9

Adjusted P&L

(7)

Temporary exemption

from applying IFRS 9

(8)

Applying the temporary exemption

Are the insurance activities predominant?

Yes

No

2018

IFRS 9

2018

2021

Insurance

standard

IFRS 9

≥

2020

(9)

Other

liabilities

Liabilities in scope of

IFRS 4

100%

75%

Indicative

Assessing predominance

0%

Temporary

exemption

9 Pure insurance

company

Financial

conglomerate

Insurer with

significant

investment contracts

Pure bank

In general, who

may be

permitted to use

the exemption?

Mix of

liabilities

First time

adopters of

IFRS

(10)

(11)

The proposals

Items measured

at amortised cost

or classified as

AFS

Items classified at

FVTPL

Move change in

value to OCI

IAS 39

IFRS 9

Difference between

IAS 39 and IFRS 9

On

transition

Overlay

adjustment

Overlay

approach

11

(12)

Weighing the costs and benefits

Temporary volatility relief

in P&L

Use IFRS 9 expected credit

loss impairment model

Costs

Benefits

Accounting mismatch relief

in P&L

All entities with insurance

contracts can apply it

Running two standards in

parallel

Implementing two

standards in short period

Tracking financial assets

Financial statements harder

to understand

Overlay

approach

(13)

Presentation and

disclosures

(14)

Temporary exemption

Credit risk and quality

information

Fair value for assets that

would not meet the SPPI

characteristics

IFRS 9 disclosure

requirements would still

apply for…

(15)

Overlay approach

P&L

OCI

A company may choose to present the

adjustment in either…

P&L

OCI

P&L only

OCI only

P&L and OCI

or

(16)

Overlay approach

A company may choose to present the

adjustment

on each individual line

in either…

P&L

Notes

P&L

Note 1

(17)

Effective dates and

transition

(18)

Timeline A

If new insurance standard is effective

before 2021

Q3 2016

Amendments

to IFRS 4

issued

1 January 2018

Effective date of

amendments and

IFRS 9

Companies may apply:

Temporary exemption

Overlay approach

Full IFRS 9

1 January 2021

Effective date of

new insurance

standard

Full IFRS 9

required

(19)

Timeline B

If new insurance standard is effective

after 2021

Q3 2016

Amendments

to IFRS 4

issued

1 January 2018

Effective date of

amendments and

IFRS 9

Expiry date of

temporary

exemption

Companies may apply:

Temporary exemption

Overlay approach

Full IFRS 9

Effective date of

new insurance

standard

1 January 2021

Full IFRS 9

required

(20)

Transition

The IASB is proposing

requirements when a company…

The proposals aim for consistency with IFRS 9

Starts applying

an approach

Stops applying

an approach

(21)

Next steps

Read

our

New

on the Horizon

and the IASB

proposals

Speak

to your

usual KPMG

contact

Comment

on

the proposals

by 8 February

2016

(22)

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