10 UKEB Post-implementation Review of IFRS 17 Insurance Contracts

17 September 2026 Agenda Paper 10 OFFICIAL - PUBLIC

Executive Summary

Project Type: UKEB Post-implementation Review Project Scope: Significant

Purpose of the paper

The purpose of this paper is to obtain the Board’s approval for publication of the draft Request for Information (RfI) for the UKEB Post-implementation Review of IFRS 17 Insurance Contracts (UKEB PIR of IFRS 17).

Summary of the Issue

The Board considered an early draft of the RfI at its July 2026 meeting. The draft RfI in Appendix A has been updated for the comments made by the Board at that meeting.

Decisions for the Board

1 Subject to addressing any matters arising during the meeting, does the Board approve the updated draft RfI (Appendix A) for publication following the UKEB September 2026 meeting?

Recommendation

The Secretariat recommends that the Board approves the RfI for publication after the UKEB September 2026 meeting.

Appendices

Appendix A [Draft] Request for Information: UKEB Post-implementation Review of IFRS 17 Insurance Contracts

Next Steps

If approved by the Board and subject to addressing any matters arising during the meeting, the RfI will be published on the UKEB website for a comment period of 90 days. The Secretariat will continue its stakeholder outreach as part of the project.

Background

1 When the UKEB adopted IFRS 17 in May 2022, it assessed that the Standard led to a significant change in accounting practice. As a result, the UKEB is required, under the legislation¹, to conduct a post-implementation review and publish a report of the results, no later than 1 January 2028 (five years after implementation of the Standard).

2 The Board considered a draft RfI at its July 2026 meeting reflecting the preliminary evidence collected through stakeholder engagement.

3 The Secretariat has since engaged with two more UK stakeholders (an accounting firm and a life insurer) to complete the initial consultation phase of the project. The updated draft RfI in Appendix A reflects:

1. the evidence collected through stakeholder engagement in the initial consultation; and
2. the comments made by the Board at its July 2026 meeting.

Summary of key changes to the draft RfI

4 The key changes to the draft of the RfI discussed in July 2026 are as follows (for ease of reference, these are highlighted in grey in the updated draft RfI in Appendix A):

1. The reporting and use of IFRS-based APMs was added to Section 2.
2. The list of priority and significant issues identified in the IFRS 17 Endorsement Criteria Assessment (ECA) was added to Section 3.
3. A brief summary of the IASB’s considerations during the development of IFRS 17 was added to specific technical accounting matters in Section 3 to provide additional context where relevant.
4. Addition of, and changes to, questions such as (highlighted in dark grey):
   1. the effects of IFRS 17 on international comparability and global competition of insurers;
   2. the usefulness of information resulting from the application of the various accounting policy choices within IFRS 17; and
   3. any changes in stakeholder views on technical accounting matters after the implementation of IFRS 17 in the UK.

Question for the Board

1. Subject to addressing any matters arising during the meeting, does the Board approve the updated draft RfI (Appendix A) for publication following the UKEB September 2026 meeting?

Timeline

5 The expected high-level timeline of this project, including key activities and milestones, is as follows:

Appendix A: UKEB Post-implementation Review of IFRS 17 Insurance Contracts: Draft Request for Information

Draft for Discussion

Call for comments on the Request for Information of UKEB Post-implementation Review of IFRS 17 Insurance Contracts

Deadline for completion of this Request for Information: [XXXXXX DD MMM YYYY]

Please submit to: [email protected]

Introduction

A1 IFRS 17 Insurance Contracts (the Standard) replaced IFRS 4 Insurance Contracts. It established principles for the recognition, measurement, presentation and disclosure of insurance contracts (which IFRS 4 did not prescribe).

A2 The Standard was issued by the International Accounting Standards Board (IASB) in May 2017 and amended in June 2020 and December 2021. It is effective for annual reporting periods beginning on or after 1 January 2023.

A3 The UKEB approved the adoption of the amended IFRS 17 for use in the UK on 16 May 2022. At that time, it concluded that the implementation of IFRS 17 was likely to lead to a ‘significant change in accounting practice’. Therefore, it is subject to the requirements in paragraph 3 of Regulation 11 of SI 2019/685¹ which requires the UKEB to:

1. carry out a review of the impact of the adoption of the standard; and
2. publish a report setting out the conclusions of the review no later than 5 years after the date on which the standard takes effect.

A4 These requirements mean that the UKEB will publish this report by 1 January 2028. It will not alter or affect the endorsement and adoption decision made by the UKEB in 2022.

A5 The primary focus of this UKEB Post-implementation Review (PIR) is to assess whether the endorsement and adoption of IFRS 17, for application by UK companies, had the intended effect.

A6 When adopting a standard for use in the UK, the UKEB assesses whether:

1. the standard meets the technical accounting criteria of understandability, relevance, reliability and comparability;
2. the use of the standard is likely to be conducive to the long term public good in the UK; and
3. the standard is not contrary to the principle that the accounts must give a true and fair view.

A7 The UKEB will take a holistic approach to this PIR, consistent with the endorsement and adoption of IFRS 17. This means that the UKEB will consider the standard as a whole, including the disclosures it requires and its interaction with other UK-adopted international accounting standards.

Invitation to Comment

A8 The UKEB would like to understand UK stakeholders’ views on the impact of the adoption of IFRS 17 for the use in the UK.

Summary of questions

A9 The Request for Information sets out the questions in seven sections, as follows:

1. Section 1: Overall assessment of IFRS 17
2. Section 2: Usefulness of information resulting from the implementation of IFRS 17 in the UK
3. Section 3: Specific technical accounting matters to be explored
4. Section 4–6: Implementation costs of IFRS 17 in the UK, capital market effects and wider economic effects
5. Section 7: Other matters

A10 Responses to these questions will inform the UKEB’s report concluding the UKEB PIR, which in turn will be used to influence the IASB.

Guidance for responding to questions

Who should respond to this Request for Information (RfI)?

A11 Stakeholders with an interest in the quality of accounts prepared in accordance with IFRS Accounting Standards.

How to respond to this RfI?

A12 Please download this document, answer any questions on which you would like to provide views, and return it to [email protected] by [XXXXXX DD MM YYYY].

A13 You may choose not to respond to all the questions in this RfI.

Privacy and other policies

A14 The data collected through submitting this document will be stored and processed by the UKEB. By submitting this document, you consent to the UKEB processing your data for the purposes of influencing the development of and adopting IFRS for use in the UK. For further information, please see our Privacy Statements and Notices and other Policies (e.g. Consultation Responses Policy and Data Protection Policy)².

A15 The UKEB’s policy is to publish on its website all responses to formal consultations issued by the UKEB unless the respondent explicitly requests otherwise. A standard confidentiality statement in an e-mail message will not be regarded as a request for non-disclosure. If you do not wish your signature to be published, please provide the UKEB with an unsigned version of your submission. The UKEB prefers to publish responses that do not include a personal signature. Other than the name of the organisation/individual responding, information contained in the “Your Details” document will not be published. The UKEB does not edit personal information (such as telephone numbers, postal or e-mail addresses) from any other response document submitted; therefore, only information that you wish to be published should be submitted in such responses.

Your details

A16 Name: Click or tap here to enter text.

A17 Email address: Click or tap here to enter text.

A18 Are you:

If your response was ‘Other’, please describe: Click or tap here to enter text.

A19 Are you responding:

A20 If you are a preparer responding on behalf of an organisation, please indicate the name of your organisation: Click or tap here to enter text.

A21 Is your organisation an entity listed on a UK regulated market?

A22 Is your organisation a:

If your response was ‘Other’, please describe: Click or tap here to enter text.

A23 If you are a user responding on behalf of an organisation, please indicate the name of your organisation: Click or tap here to enter text.

A24 Please indicate your user type

If your response was ‘Other’, please describe: Click or tap here to enter text.

A25 Do you consent to be contacted to clarify any aspects of your response or with follow-up questions?

A26 Do you use the financial statements of:

If your response was ‘Other’, please describe: Click or tap here to enter text.

A27 Do you consent to participate in other UKEB stakeholder outreach activities in the future?

Request for Information

Section 1: Overall assessment of IFRS 17

A28 The UKEB concluded in its endorsement criteria assessment (ECA)³ that IFRS 17 met all endorsement criteria described in paragraph A6. In particular, the UKEB’s ECA concluded that:

1. IFRS 17 sets out clear principles that can be applied to insurance contracts prevalent in the UK and that will result in understandable, relevant, reliable and comparable information for users of the accounts.
2. The application of IFRS 17:
   1. would lead to an overall improvement in the quality of financial reporting for insurance contracts by specifying a comprehensive set of recognition, measurement, presentation and disclosure requirements internationally for the first time;
   2. was not expected to result in significant additional ongoing costs for preparers in the insurance sector. Moreover, the standard was expected to deliver benefits to users of accounts, particularly increased comparability and transparency; and
   3. was not expected to have an adverse effect on the UK economy, including on economic growth. This was concluded after considering the potential consequences of not adopting IFRS 17, alongside with other relevant economic factors.
3. IFRS 17 is not contrary to the true and fair view principle set out in Regulation 7(1)(a) of SI 2019/685.

A29 The UKEB also concluded as part of the ECA that the impact of IFRS 17 on non-insurance companies in the UK was expected to be minor even though a significant impact on individual entities could not be ruled out.

A30 Feedback from stakeholders during the initial consultation is summarised below:

1. Users of financial statements generally indicated that the implementation of IFRS 17 in the UK led to an overall improvement in the quality of financial information provided by insurers. The continued use of IFRS-based Alternative Performance Measures (APMs) is also considered from both the preparer and user perspectives. See also Section 2 of this RfI.
2. Stakeholders have identified certain technical accounting issues, which were also considered as part of the ECA. See also Section 3 of this RfI.
3. Preparers generally indicated that the one-off implementation costs of IFRS 17 were significant, especially for life or composite insurers. Preparers noted an increase in ongoing reporting costs as compared to reporting under IFRS 4, however these have largely been subsumed into business-as-usual costs. Users reported spending a significant amount of time to familiarise with IFRS 17 when the Standard was first introduced. See also Section 4 of this RfI.
4. Stakeholders have not yet observed capital market effects as a result of the adoption of IFRS 17. See also Section 5 of this RfI.
5. Preparers generally indicated that the explicit consideration of onerous contracts under IFRS 17 has affected product offering decisions in some circumstances and has enhanced governance processes internally. They did not observe any significant impact of the adoption of IFRS 17 on domestic competition. See also Section 6 of this RfI.

A31 Some stakeholders from non-insurance companies⁴ that issue contracts in the scope of the Standard noted that:

1. it is worth exploring whether further scope exclusions need to be included in IFRS 17; and
2. there are often costs associated with assessing whether a contract is within the scope of IFRS 17, with potentially limited benefits.

Question 1

Question 1

1. In your view, and with reference to paragraph A28 of this RfI on the purpose of the UKEB PIR, has the adoption of IFRS 17 for use in the UK had the intended effect? Please explain.
2. Are you aware of non-insurance companies in the UK that apply IFRS 17? If so, do they have a common type of contract that is in scope of IFRS 17? Does the application of IFRS 17 create a significant issue for the companies affected?

Section 2: Usefulness of information resulting from the implementation of IFRS 17 in the UK

A32 Feedback from the UKEB’s initial consultation indicated that the introduction of IFRS 17 led users to update their valuation models, although it did not fundamentally change the way they evaluate insurance entities. The extent of IFRS 17 information utilised (including through the use of IFRS-based APMs), and therefore the extent of change, varies across users. The use of IFRS-based APMs is considered in greater detail later in this section.

A33 Both generalist and specialist users of financial statements generally indicated in the initial consultation that the implementation of IFRS 17 in the UK led to an overall improvement in the quality of financial information provided by insurers as compared to IFRS 4. This was consistent with the expectations set out in the ECA. Some stakeholders noted an increase in the level of engagement from generalist users.

A34 In particular, most users during the initial consultation emphasised the following benefits under IFRS 17, that aligned with the ECA, namely:

1. Improved comparability amongst insurers globally, including within multinational groups.
2. Enhanced understandability and transparency of the revenue and profit recognised in the period, due to the elimination of gain on initial recognition through the deferred profit mechanism (i.e. Contractual Service Margin, CSM), especially in the life insurance business. With the CSM providing a more meaningful pattern of profit recognition that better reflects the underlying economics of the insurance business, analysts’ forecasts can rely on higher quality data points to enhance accuracy.
3. Closer alignment to the regulatory reporting framework applied in the UK, Solvency II.
4. Separation of underwriting and investing results in the income statement.

A35 While users noted that there is an overall improvement in financial reporting under IFRS 17, in the initial consultation they also raised a number of issues similar to those considered in the ECA, such as:

1. The number of accounting policy choices and available interpretations under IFRS 17 leading to a relative lack of comparability.
2. The CSM being measured at locked-in interest rates under the General Measurement Model (GMM), discussed in more detail in Section 3.1.
3. Discount rates, discussed in more detail in Section 3.3.

A36 As part of the initial consultation, but not noted in the ECA, users also highlighted:

1. Concerns about the disclosures of financial information provided under IFRS 17 being disaggregated by measurement model instead of by business or segmental mix. Users suggested that disclosures driven by the underlying product economics would provide more decision-useful information.
2. A spectrum of views on whether the volume of disclosures required under IFRS 17 was too high.

Section 2.1: Usefulness of information resulting from the implementation of IFRS 17 in the UK

Question 2.1

1. In your view, is the usefulness of financial information resulting from the implementation of IFRS 17 in the UK largely in line with initial expectations? Please explain why.
2. In your view, has the implementation of IFRS 17 improved the international comparability of financial reporting amongst insurers?
3. Do the requirements in IFRS 17 provide a clear and sufficient basis for entities to make appropriate judgements and that the requirements can be applied consistently? Please explain why.
4. In your view, are the accounting policy choices in IFRS 17 helpful in providing decision-useful information to users and in enabling preparers to better reflect their business activities? Please explain, including identifying which choices are helpful or not helpful and why.

Use of IFRS-based APMs

A37 Feedback from the initial consultation indicated that IFRS-based APMs have remained commonly reported by insurers following the adoption of IFRS 17, and that they are widely utilised by users of financial statements. This is consistent with the expectations of the majority of users surveyed during the UKEB’s endorsement process of IFRS 17.

A38 Whilst such APMs are ultimately tailored to each individual insurer, there are broadly common measures reported based on the type of business written. For example, UK life insurers typically report an adjusted operating profit⁵ metric which, amongst other adjustments:

1. reflects long-term expected investment returns instead of short-term market volatility;
2. largely removes the effect of accreting interest on the CSM at locked-in rates, discussed in more detail in Section 3.1, where the CSM mechanism is retained within the metric; and
3. accounts for the acquisition of contracts acquired in their settlement period, discussed in more detail in Section 3.2, under PAA instead of GMM where applicable.

A39 UK non-life insurers usually disclose IFRS-based APMs that focus on their underwriting results such as:

1. gross written premiums; and
2. combined ratio, typically calculated as the amount of claims and related expenses as a proportion of insurance revenue after considering the effects of reinsurance. This is often presented on both a discounted and an undiscounted basis.

Question 2.2

1. Do you report (as a preparer) or utilise (as a user) APMs in external reporting or analysis? If so, please describe the key measures used and the reasons for using them.
2. Do you expect IFRS-based APMs to be reported or utilised more prominently in the future? Do you also expect such APMs to become increasingly aligned with IFRS 17? Please explain why.

Section 3: Specific technical accounting matters to be explored

A40 The UKEB identified the following priority and significant issues when considering the endorsement and adoption of IFRS 17 for use in the UK.

A41 Among the issues identified above, three were most frequently raised by UK stakeholders in the initial consultation. These matters are considered in further detail below.

Technical accounting matter 1: Interest accretion at the locked-in rate for CSM under the GMM

A42 As part of the development of the final Standard, the IASB considered whether the rate used to accrete interest on the CSM for insurance contracts without direct participation features should be a current or locked-in rate.

A43 The IASB decided that a locked-in discount rate is appropriate⁷ since:

1. This is consistent with the determination of the unearned profit on initial recognition. The CSM represents this unearned profit and not future cash flows.
2. This provides a faithful representation of the revenue earned as services are provided, reflecting the price set at initial recognition for such services. In contrast, measuring the CSM at current rates would mean that the underwriting result captures the effects of changes in discount rates, which would affect the separation of underwriting and investing results in the income statement.
3. The gain or loss arising from the differences between a change in fulfilment cash flows and a change in the adjustment to the CSM provides information about the cumulative effect of changes in discount rates.

A44 In the UKEB’s initial consultation, stakeholders indicated that the requirement to lock in the discount rate at initial recognition when measuring the CSM under GMM gives rise to counterintuitive results in the income statement. This technical accounting matter was one of the significant issues considered in the IFRS 17 ECA⁸.

A45 The majority of stakeholders, preparers and users alike, observed that this requirement:

1. Affects understandability, as insurers may recognise an overall loss in the period despite a favourable change in insurance assumptions. This is due to the difference in discount rates used between the CSM and the other components of the insurance contract balances. The reverse can also happen where an overall profit is recognised in the period even though the insurance assumptions have changed unfavourably.
2. Reduces relevance given the use of historical rates especially when compared with:
   1. financial assets, which are typically subsequently measured at fair value; and
   2. the fulfilment cash flows within the same insurance contract balances, which are measured using current discount rates.

A46 The above effects are heightened for contracts with longer duration such as annuities, given their sensitivity to interest rate movements. To reduce the accounting impact, some annuity providers have either purchased or reclassified significant amounts of debt securities to be held at amortised cost.

A47 The UK annuity market is sizable⁹ and the CSM for annuities across the life insurers operating in the UK is considerably larger than other insurance products¹⁰. A significant proportion of this business used the fair value approach for transitioning to IFRS 17 for which the locked-in rate used to measure the CSM on transition was mostly determined on 1 January 2022, when interest rates were significantly lower than current rates¹¹.

A48 Potential solutions suggested by stakeholders during the UKEB’s initial consultation to reduce the above accounting mismatch include:

1. Measurement of the CSM at current rates, which could also increase comparability with the Variable Fee Approach (VFA).
2. Allowing an option to designate financial assets to be subsequently measured at amortised cost.
3. Allowing some form of risk mitigation¹² or hedge accounting¹³.

Section 3.1: Interest accretion at the locked-in rate for CSM under the GMM

Question 3.1

1. Do you consider that this is a significant issue? Please explain.
2. Have your views on this matter changed after IFRS 17 was implemented in the UK? Please explain. For example, this can be due to increased familiarity with the requirements of the Standard or due to an unexpected impact or consequence.
3. If you believe that this is a significant issue that needs to be addressed, how could it be addressed? Please also explain how the benefits of an alternative approach could outweigh the costs.

Technical accounting matter 2: Contracts acquired in their settlement period

A49 The UK insurance market has seen a number of acquisitions of large listed and unlisted UK insurers in recent years. As part of the process of acquiring or transferring¹⁴ existing insurance contracts, a portion of those contracts are likely to be in their settlement period giving rise to this technical accounting matter.

A50 During the development of the final Standard, the IASB considered whether to create an exception to the general classification and measurement principles in IFRS 17 for contracts acquired in their settlement period.

A51 The IASB decided not to create an exception¹⁵ since:

1. Doing so would require an exception to the definition of an insured event, which is fundamental to IFRS 17. Some potential suggestions on the resulting recognition, measurement and presentation requirements by stakeholders then were considered by the IASB to introduce complexity for users of financial statements and reduce comparability with the requirements for other transactions.
2. The entity acquiring such contracts is in a different position to the original entity issuing the contracts. Accounting for such contracts based on the facts and circumstances at the acquisition date provides useful information.

A52 This technical accounting matter was one of the significant issues considered in the IFRS 17 ECA¹⁶. Feedback from stakeholders in the UKEB’s initial consultation suggests that the main concern relates to the acquisition of insurance contracts originally measured under Premium Allocation Approach (PAA) which are required to be measured under GMM after acquisition.

A53 This typically occurs as a result of the claims settlement period being considerably longer than the coverage period for certain general insurance products. Given the requirement to assess the contracts at the date of acquisition¹⁷ and the change in insured event, meeting the eligibility criteria for measurement under PAA¹⁸ becomes difficult for such contracts after acquisition.

A54 For such contracts, the insured event becomes the determination of the ultimate cost of claims¹⁹. This concept also applies to retrospective reinsurance contracts such as adverse development covers which may also be used in portfolio transfers.

A55 Stakeholders, primarily preparers, observe that the current accounting treatment for such contracts:

1. Affects understandability since:
   1. insurance revenue, including any profits, is recognised as a result of a transfer of contracts even though the service received by the policyholder has not changed and the premium received from the policyholder has already been fully recognised as insurance revenue in the transferring entity; and
   2. the CSM is typically minimal on initial recognition which means that relatively small changes in the timing or amount of the settlement of the claim could result in the contracts becoming onerous.
2. Reduces comparability for an extended period of time as insurance revenue is recorded in the income statement until the ultimate cost of the claim is determined, which is typically when the claim is settled.

A56 General feedback from stakeholders on the higher operational cost and complexity of applying GMM over PAA also suggests that the potential change in measurement model as a result of such transactions may have wider economic implications, especially where the acquirer only applies PAA to their insurance contracts.

Section 3.2: Contracts acquired in their settlement period

Question 3.2

1. Do you consider that this is a significant issue? Please explain.
2. Have your views on this matter changed after IFRS 17 was implemented in the UK? Please explain. For example, this can be due to increased familiarity with the requirements of the Standard or due to an unexpected impact or consequence.
3. If you believe that this is a significant issue that needs to be addressed, how could it be addressed? Please also explain how the benefits of an alternative approach would outweigh the costs.

Technical accounting matter 3: Discount rates

A57 Under the requirements of IFRS 17, the discount rates used affect the net financial results in the income statement and the value of the insurance contract balances, including the amount of CSM (if any), on the balance sheet.

A58 During the UKEB’s initial consultation, stakeholders have raised two main concerns on the IFRS 17 requirements related to discount rates:

1. limited disclosure on the illiquidity premium included in the discount rates; and
2. whether the application of discounting to the insurance contract balances for non-life insurance business provides decision-useful information.

A59 As noted in the ECA, IFRS 17 does not mandate any particular discount rate and typically allows a choice between using a top-down approach or a bottom-up approach to determine the discount rates. This technical accounting matter was one of the priority issues considered in the IFRS 17 ECA²⁰.

A60 Determining the discount rate, which is important in understanding the insurer’s financial performance and financial position, requires considerable judgement. For example, the top-down approach under IFRS 17 involves determining the discount rate based on a reference portfolio of assets after certain adjustments which involves significant judgement.

A61 In particular, some users and professional services firms have noted that there is limited disclosure on the illiquidity premium included within the discount rates used, which affects understandability and comparability. The illiquidity premium is, at a high level, derived from the return above the risk-free rate earned on illiquid assets, which is not directly observable. Therefore, it is the component of the discount rate that is most subject to judgement.

A62 In addition, and for non-life insurance business only, a number of preparers and users had mixed views on whether the application of discounting to non-life insurance contract balances provided decision-useful information:

1. Some stakeholders suggested that discounting introduces unnecessary market volatility and judgement into insurers’ results, as non-life insurance is generally short-term business where the focus is on underwriting profitability. Discounting can therefore affect the understandability of the financial results. IFRS 17’s requirement on discounting also affects comparability since not all insurance contracts measured under PAA are required to be discounted²¹ and insurers did not typically apply discounting for non-life insurance business previously.
2. Some believed that discounting is useful in understanding the insurers’ results, especially for casualty business with long claims settlement periods, e.g. employers’ liability insurance.
3. Others could see the merits of both views and wanted to know both the discounted and undiscounted figures, which suggests that the current level of disclosure or disaggregation may not be at the desired level.

Section 3.3: Discount rates

Question 3.3

1. Do you consider that the matters described above are significant issues? Please explain.
2. In your view, are the disclosures required by IFRS 17 on the discount rates used providing sufficient decision-useful information for users? Please explain.
3. Have your views on these matters changed after IFRS 17 was implemented in the UK? Please explain. For example, this can be due to increased familiarity with the requirements of the Standard or due to an unexpected impact or consequence.
4. If you believe that these are significant issues that need to be addressed, how could they be addressed? Please also explain how the benefits of an alternative approach would outweigh the costs.

Remaining priority and significant issues identified in the ECA

A63 Whilst the other priority and significant issues identified in the ECA have not been raised as frequently as the above matters in the initial consultation, most of these matters were mentioned at least once by UK stakeholders.

Section 3.4: Remaining priority and significant issues identified in the ECA

Question 3.4

1. Do you consider that any of the remaining matters is a significant issue? Please identify which one(s) and explain.
2. Have your views on this matter or these matters changed after IFRS 17 was implemented in the UK? Please explain. For example, this can be due to increased familiarity with the requirements of the Standard or due to an unexpected impact or consequence.
3. If you believe that any of the remaining matters is a significant issue that needs to be addressed, how could it be addressed? Please also explain how the benefits of an alternative approach would outweigh the costs.

Section 4: Prevalence and magnitude of one-off and ongoing costs to implement IFRS 17 in the UK

One-off implementation costs for preparers

A64 During the initial consultation, and in line with the views in the ECA:

1. Preparers generally indicated that the implementation of the IFRS 17 GMM model was costly and operationally complex.
2. In contrast, where insurers were able to adopt the simplified PAA model for most or all of their insurance contracts, particularly in the non-life insurance business, implementation costs were relatively low.
3. Preparers reported that the concurrent implementation of IFRS 9 Financial Instruments²² was relatively straightforward, leading to minimal additional implementation costs.

A65 During the initial consultation, preparers largely attributed one-off monetary implementation costs to:

1. External consulting (e.g. training, technical accounting and actuarial advice).
2. Staff headcount increases.
3. Accounting software and other development costs (e.g. the development of a CSM calculation engine, development of data repositories).
4. Review of accounting policies and methodologies by accounting firms.

A66 Preparers interviewed during the initial consultation also commented that they incurred considerable opportunity costs, attributed to allocation of existing staff time to the IFRS 17 implementation project, including senior management. They reported that resources were routinely re-prioritised from other projects of operational and commercial importance.

Section 4.1: Prevalence and magnitude of one-off costs to implement IFRS 17 in the UK for preparers

Question 4.1

1. For your organisation, were the one-off monetary costs to implement IFRS 17 largely as initially expected? Please explain why. Please describe how entity-specific facts and circumstances have affected your response.
2. For your organisation, were the one-off opportunity costs to implement IFRS 17 largely as initially expected? Please explain why. Please describe how entity-specific facts and circumstances have affected your response.

Ongoing costs for preparers

A67 At the time of the initial consultation, preparers indicated that the ongoing costs associated with meeting IFRS 17 requirements had largely been subsumed into business-as-usual costs. Preparers generally observed an increase in financial reporting costs as compared to reporting under IFRS 4.

A68 Preparers attributed incremental ongoing costs to:

1. Licencing fees, for example, for accounting software, data processing tools, external data (e.g. yield curves), and data storage.
2. An increase in headcount, as a result of retained staff from the IFRS 17 implementation project to handle its reporting complexity as well as the extent of disclosures required²³.
3. The work required to demonstrate that new groups of insurance contracts written are eligible to be measured under PAA, as this may involve significant judgement.
4. The treatment of onerous contracts and the identification of contract boundaries were also identified as areas that required moderate ongoing effort.
5. A permanent increase in audit fees since implementation, due to the considerable time and effort needed to audit the disclosures, as well as the supporting systems and data required under IFRS 17.

A69 The feedback received is consistent with the ECA.

Section 4.2: Prevalence and magnitude of ongoing costs to implement IFRS 17 in the UK for preparers

Question 4.2

1. For your organisation, are the ongoing costs to implement IFRS 17 largely as initially expected? Please explain why. Please also describe how entity-specific facts and circumstances have affected your response.

Costs for users

A70 During the initial consultation, users indicated that when IFRS 17 was first introduced, they spent significant time to familiarise with the requirements of the Standard, interpret the new line items and disclosures, and adapt their models. They also indicated that ongoing costs are negligible. This feedback is broadly in line with the ECA.

Section 4.3: Prevalence and magnitude of costs for users related to the adoption of IFRS 17

Question 4.3

1. For you or your organisation, were the one-off and ongoing costs related to the adoption of IFRS 17 largely as initially expected? Please explain why. Please describe how your specific facts and circumstances have affected your response.

Section 5: Capital market effects

A71 In the UKEB’s initial consultation, stakeholders noted that:

1. IFRS 17 is mostly beneficial to specialist investors who already understand the insurance business. However, some stakeholders indicated that they observed an increase in generalist investors’ interest in insurance entities’ financial statements, though evidence so far is limited.
2. The low number of IFRS 17-based data points (at the time of the initial consultation, four years) limits users’ ability to conduct accurate forecasts based on IFRS 17 metrics. However, they indicated that when more data points are available, they’ll be able to rely on larger samples to enhance the accuracy of their forecasts.

A72 As a consequence, stakeholders have not highlighted significant capital market effects as a result of the adoption of IFRS 17 (e.g. effects of announcements on stock prices or reductions in cost of capital).

A73 One user suggested that capital markets have the potential to deliver positive effects, such as reductions in the cost of capital in the future.

A74 The feedback received during the initial consultation on capital market effects is consistent with the ECA.

Section 5: Capital market effects

Question 5

1. In your view, has the application of IFRS 17 in the UK been associated with capital market effects such as increased liquidity of traded securities or a reduction in cost of capital thus far? Please explain why.
2. In your view, is the application of IFRS 17 in the UK expected to be associated with capital market effects such as increased liquidity of traded securities and a reduction in cost of capital in the future? Please explain why.

Section 6: Wider economic effects

A75 In the UKEB’s initial consultation, stakeholders provided feedback on the following wider economic effects, as summarised below.

A76 Changes to product offering and pricing: Feedback from preparers suggested that the explicit consideration of onerous contracts under IFRS 17 has affected product offering decisions in some circumstances because IFRS 17 makes onerous contracts more apparent, both internally and externally.

A77 Impact on competition:

1. Preparers did not observe any significant impact of the adoption of IFRS 17 on competition domestically.
2. It was often noted during the initiation consultation that the UK insurance sector went through a series of high-profile acquisitions in the years after the adoption of IFRS 17. Preparers suggested that the acquisitions were not directly attributable to the adoption of IFRS 17, but rather to the underlying economics.
3. Preparers reported that non-life insurance entities, especially those that apply the simplified PAA model to the entirety of their insurance business, have a disincentive to enter into contracts that could be ineligible for PAA. This is so they do not incur the substantial costs that the application of the GMM model would entail. This may limit commercial opportunities and growth in certain business segments.

A78 Enhanced governance processes: Preparers generally reported that the adoption of IFRS 17 had a positive impact on internal processes, for example because it improved communication within the organisation and fostered joint work between actuarial and finance departments. It also enhanced the visibility and comparability of insurance business within broader conglomerates. Some preparers and users also believed that IFRS 17 increased the alignment between the IFRS financial statements and Solvency II, therefore making statutory and regulatory reporting more consistent.

A79 Investment accounting decisions by insurance companies: Since the implementation of IFRS 17, a few annuity providers have either purchased or reclassified significant amount of debt securities to be held at amortised cost to better match the impact of measuring the CSM at locked-in rates. See Section 3.1 for details.

A80 Credit ratings: Credit rating agencies reported that their ratings of insurance entities were unaltered by the adoption of IFRS 17.

A81 The feedback obtained during the initial consultation on wider economic effects is broadly consistent with the ECA.

Section 6: Wider economic effects

Question 6

1. In your view, was the application of IFRS 17 in the UK associated with the wider economic effects described in paragraphs A75–A81?
2. In your view, has the application of IFRS 17 in the UK been associated with any other wider economic effects so far? In particular, has the application of IFRS 17 affected competition among insurers globally?

Section 7: Other matters

Other matters that are relevant to the UKEB PIR of IFRS 17

A82 Stakeholders are welcome to share feedback on any other matters relevant to this UKEB PIR which have not been specifically covered by the sections above in this RfI.

Section 7.1: Other matters that are relevant to the UKEB PIR of IFRS 17

Question 7.1

1. Are there any other matters the UKEB should consider as part of the UKEB PIR of IFRS 17? If so, please explain why, including their significance to the UK.

Other matters that could be addressed through a future IASB project

A83 Feedback from stakeholders during the UKEB’s initial consultation identified specific technical accounting matters related to the requirements of IFRS 17 (Sections 3.1–3.3) and the number of accounting policy choices available (Section 2) that may require addressing by the IASB. To the extent there are other issues in the UK that could be addressed through a future IASB project, the UKEB would like to understand more about them.

Section 7.2: Other matters that could be addressed through a future IASB project

Question 7.2

1. Are there any other matters, other than those specifically mentioned in paragraph A83 above, that could be addressed through a future IASB project? If yes, please describe them and explain why they create a significant issue for UK companies. If you think there is an alternative approach, please describe it, including explaining how the benefits would outweigh the costs.

Annex A: Glossary

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