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Esther Pieterse The South African Insurance Industry Survey 2016 | 69
Associate Director, Wil IFRS 9
Department of Professional Practice
Tel: +27 82 719 5806 impact insurers?
Email: esther.pieterse@kpmg.co.za
How does IFRS 9 impact insurers? –– Issuing investment contracts that are measured at fair
The effective date of IFRS 9 Financial Instruments (IFRS 9) is value through profit or loss (FVPL) under IAS 39 Financial
around the corner – could South African insurers adopt IFRS 9 Instruments: Recognition and Measurement (IAS 39).
when the final insurance contracts standard1 is effective,
or should they start an IFRS 9 conversion project soon? Investment contracts are also included as they are often sold
alongside similar products with significant insurance risk and
Many preparers were concerned as the effective date of the are regulated as insurance contracts (i.e. they are related to
final insurance contracts standard will only be after 1 January insurance).
2020, far later than the effective date of IFRS 9 which is for
year-ends commencing on or after 1 January 2018. The predominance ratio for an entity should be calculated as
follows:
The International Accounting Standards Board (IASB)
addressed these concerns and published an exposure draft2 [Liabilities arising from the activities
towards the end of last year, giving insurance companies, related to insurance] + [other liabilities that are
subject to certain criteria to be met, the options to defer the connected to those activities, such as investment
implementation of IFRS 9 (deferral approach) or to reduce the
impact of IFRS 9 on current numbers (overlay approach). contract liabilities]
These final amendments to IFRS 4 Insurance Contracts Total carrying amount of the entity’s liabilities
(IFRS 4)3 are currently expected to be published in
eptember 2016. An entity’s activities should be deemed to be predominately
related to insurance only if the predominance ratio is:
Deferral approach
Entities that qualify for the deferral approach will only apply –– Greater than 90 percent; or
IFRS 9 for year-ends commencing on or after 1 January 2021.
–– Greater than 80 percent but less than or equal to 90 percent,
A temporary exemption from applying IFRS 9 would and the entity can provide evidence that it does not have a
be permitted for an entity, if the entity’s activities are significant activity that is unrelated to insurance.
predominantly related to insurance and comprise of:
–– Issuing contracts in the scope of IFRS 4 that give rise to
liabilities whose carrying amount is significant compared
with the total carrying amount of the entity’s liabilities; and
1 Final standard expected to be issued at the end of 2016.
2 We have also referred to subsequent meetings up to May of the IASB where tentative decisions were made.
3 Effective for year-ends commencing on or after 1 January 2005.
