Consultation Paper - Proposed Changes to the Statutory Financial Statements Reporting Framework for Commercial Insurers and Insurance Groups - IFRS 17 Considerations (2023-05)

Summary

This BMA consultation paper sets out proposed changes to the Statutory Financial Statements (SFS) reporting framework for commercial insurers and insurance groups that report using IFRS accounting principles, to reflect the introduction of IFRS 17. The Authority is not proposing changes to its Economic Balance Sheet, eligible capital rules or Enhanced Capital Requirement as a result of IFRS 17. The changes would be implemented through revised Insurance Account Rules and Insurance Group Rules. Feedback from commercial insurers reporting under IFRS and other stakeholders is invited.

• Scope: Proposals apply only to commercial Insurers and Groups reporting using IFRS accounting principles; no changes proposed for the Limited Purpose Insurer sector.
• New reporting forms: New SFS schedules covering balance sheet, income statement, statement of capital and surplus, and notes, to be prepared on both consolidated and unconsolidated bases, with prudential filters similar to the current regime.
• Balance sheet changes: Separate presentation required for insurance and reinsurance contract assets/liabilities, investment contracts with discretionary participation features, and reconciliations of changes in reinsurance and insurance contract balances; premium receivables and policy loans folded into insurance contract liabilities but disclosed in notes.
• Reserving requirements: General Business insurers (Class 3A, 3B, 4) and Long-term insurers (Class C, D, E) must maintain adequate provisions for reported and IBNR claims, with net liabilities not less than those in audited IFRS financial statements.
• CSM treatment: The contractual service margin under IFRS 17's General Measurement Model is to be reported as part of insurance contract liability in the SFS.
• Income statement changes: Insurers must present insurance revenue, insurance service expenses, reinsurance income/expenses and net financial results per IFRS 17 concepts, with supplementary disclosure of gross and net written premiums.
• Capital and surplus: Impact of transitioning to IFRS 17 in the first year of new forms to be recorded and disclosed separately in Line 2(g), with a reconciliation of statutory capital and surplus to IFRS financial statements required in the CSR Form V(g).
• Other amendments: Schedules VII and VIII of the Insurance Accounts Rules (Minimum Solvency Margin) and the minimum liquidity ratio computation are amended to map to the new IFRS-based reporting forms.

The new forms would first apply for the year-end in which an insurer first reports under IFRS 17, with no comparatives required in that first year, though supervisors expect to engage with insurers on IFRS 17 adoption impacts. This is a consultation only; no rules have yet been finalised or brought into force.

Key obligations

• Commercial insurers and groups reporting under IFRS must submit comments on the proposals to riskanalytics@bma.bm by close of business 14 July 2023
• Once adopted, IFRS-reporting insurers must prepare SFS on both consolidated and unconsolidated bases using the new forms and prudential filters
• Class 3A, Class 3B and Class 4 insurers must set aside adequate provisions for reported but unpaid claims and IBNR losses, with net insurance contract liabilities not less than those in audited IFRS financial statements
• Class C, Class D and Class E insurers must present adequate provisions for incidents occurring and reported before year end, with net long-term insurance contract liabilities not less than those in audited IFRS financial statements
• Insurers must disclose reconciliations of changes in insurance and reinsurance contract assets/liabilities and a reconciliation of statutory capital and surplus to IFRS financial statements via CSR Form V(g)
• Insurers with a 31 December 2023 year-end preparing first full-year IFRS 17 financial statements must submit annual regulatory reporting on the proposed forms by 4 April 2024
• Insurers with non-calendar year-ends (e.g. 31 March) must submit regulatory reporting on the proposed forms by the applicable deadline (e.g. 31 July 2024 for a 31 March 2024 year-end)

Applies to

commercial insurers, insurance groups, Class 3A insurers, Class 3B insurers, Class 4 insurers, Class C insurers, Class D insurers, Class E insurers, Limited Purpose Insurers (explicitly excluded)

Deadlines

• 14 July 2023: Deadline for stakeholders to submit comments on the consultation paper to riskanalytics@bma.bm
• 4 April 2024: Deadline for insurers with a 31 December 2023 year-end to submit annual regulatory reporting using the proposed new IFRS 17 based SFS forms
• 31 July 2024: Example deadline for an insurer with a 31 March 2024 year-end to submit regulatory reporting using the proposed forms