Stakeholder Letter – Consultation Paper – "Proposed Changes to the Statutory Financial Statements Reporting Framework" for Commercial Insurers (2023-11-28)

Summary

This is a BMA stakeholder letter responding to industry feedback on its May 2023 consultation paper regarding changes to the Statutory Financial Statements (SFS) reporting framework for commercial insurers, driven by the adoption of IFRS 17. It sets out the Authority's final positions on several technical reporting issues raised by stakeholders and confirms when the new IFRS-based reporting forms become due.

• EBS and BSCR: IFRS 17 will not change the Economic Balance Sheet valuation framework, eligible capital rules or the Enhanced Capital Requirement; the BSCR model will add a new field for insurers to indicate whether SFS were prepared on a GAAP or IFRS basis, with linked schedules and control checks.
• Balance sheet presentation: Insurance and reinsurance contract balances must be presented on a gross basis: positive balances reported as assets, negative balances reported as liabilities (no net presentation).
• Disclosure notes: All disclosure notes must be reported on an unconsolidated basis, except the supplementary notes to the statement of income or loss, which must be reported on both an unconsolidated and consolidated basis; supplementary/additional disclosures continue to be reported on an IFRS 4 valuation basis.
• Liquidity ratio: The liquidity ratio calculation has been amended so that contra asset balances forming part of insurance contract liabilities (e.g., premium receivables, funds held by ceding reinsurers, deferred acquisition costs) are grossed up from total liabilities and included as relevant assets.
• Timelines: The new IFRS-based reporting forms apply from the year-end when an insurer first reports under IFRS 17; for insurers with a 31 December year-end preparing their first full-year IFRS 17 financial statements as of 31 December 2023, annual regulatory reporting on the new forms is due to the Authority by 30 April 2024.

The Authority notes it will imminently publish amendments to the Insurance Accounts Rules and impacted schedules, providing the updated IFRS-based SFS format, instructions and guidance. Stakeholders with questions are directed to contact the Authority's risk analytics team.

Key obligations

• Insurers who first report under IFRS 17 for a 31 December 2023 year-end must submit annual regulatory reporting using the new IFRS-based SFS forms to the BMA by 30 April 2024.
• Insurers must report insurance and reinsurance contract balances on a gross basis on the balance sheet (positive balances as assets, negative balances as liabilities), not netted.
• Insurers must report all disclosure notes on an unconsolidated basis, except the supplementary notes to the statement of income or loss, which must be reported on both an unconsolidated and consolidated basis.
• Insurers must report supplementary/additional disclosure notes on an IFRS 4 valuation basis.
• Insurers must indicate in the BSCR model whether their statutory financial statements were prepared on a GAAP or IFRS basis.
• Insurers must apply the amended liquidity ratio calculation, grossing up contra asset balances linked to insurance contract liabilities and including them as relevant assets.

Applies to

commercial insurers

Deadlines

• 30 April 2024: Deadline for insurers with a 31 December year-end preparing their first full-year IFRS 17 financial statements as of 31 December 2023 to submit annual regulatory reporting on the new IFRS-based SFS forms to the BMA.