By Karl Angelo N. Vidal, Reporter
THE INSURANCE Commission (IC) has deferred by another year the implementation of new accounting rules for life and non-life insurers to give these firms more time to comply.
Insurance Commissioner Dennis B. Funa said in a statement on Monday that the regulatory agency has deferred the implementation date of International Financial Reporting Standard (IFRS 17) Insurance Contracts for local insurers to Jan. 1, 2023, granting an additional year from the date of effectivity proposed by the International Accounting Standards Board (IASB).
“There is a necessity for an additional period of time, in addition to that proposed by the IASB, to prepare for the implementation of IFRS 17,” Mr. Funa was quoted as saying in the statement.
The new accounting standard was issued by the IASB on May 18, 2017, with a mandatory effective date of annual periods beginning at the start of 2021. This was later deferred for a year to Jan. 1, 2022.
Mr. Funa said the implementation of IFRS 17 was bombarded by challenges such as tight timeline, determination of model, lack of clarity, and tight budget, among others.
He added that other countries have varying implementing periods for IFRS 17 in their jurisdiction.
“In the case of India, they will have an early adoption of IFRS beginning either 2020 or 2021. Malaysia, on the other hand, will adopt it in 2021 but subject to the development of IASB,” the commissioner said, adding that only Thailand intends to comply with IFRS based on the date proposed by the IASB.
Meanwhile, local insurance companies that are willing to comply with the new accounting rules can already do so.
“Insurers who wish to voluntarily comply with the IFRS 17 before the deferred effectivity date are not precluded to implement the same. In fact, based on the issue papers submitted to the Insurance Commission, there are insurance companies set to implement IFRS 17 due to the requirement of their respective parent companies,” Mr. Funa said.
The IFRS is a set of accounting standards that are recognized by 166 economies, including the Philippines. It provides a guide on how transactions and other information should be reported in financial statements.
Currently, the IFRS 4 Insurance Contracts is being observed and implemented.
Sought for comment, Philippine Insurers and Reinsurers Association Deputy Chairman Michael F. Rellosa said it welcomes the decision, as the extra year will give non-life insurers more time to comply with the new requirements.
“The effect of the [new rules] is widespread. For one, it changes the way we recognize our assets and liabilities… We might have to put up our reserves,” Mr. Rellosa told BusinessWorld in a phone interview.
He added that the new accounting standards may require insurers to procure new software and servers, which will cost them millions.
The implementation of IFRS 17 comes at a time when insurers are beefing up their capital ahead of the upsized minimum statutory requirement of the IC, wherein insurance companies should have at least P900 million in net worth by the end of 2019 from the current P550 million.
Mr. Funa told reporters on Friday that he is “concerned” that some non-life insurers are “still far off” from the minimum required capital.
“It’s going to be a huge disruption. The additional one year will be helpful so we can do extra preparation like simulation,” Mr. Rellosa added.
He also urged the concerned agencies such as the IC, the Securities and Exchange Commission (SEC) as well as the Bureau of Internal Revenue to reconcile on what time frame will be followed by insurance companies to avoid confusion.
“However, if SEC did not defer, the deference of IC won’t matter. We might end up giving three different financial statements, so they have to reconcile it.”
Meanwhile, the Philippine Life Insurance Association, Inc. has not replied to request for comments as of press time.
The IC added that pre-need firms, health maintenance organizations and mutual benefit associations shall maintain compliance with the currency accounting standards until further required to comply with the IFRS 17.

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