New accounting rules are too expensive and difficult to understand, says reinsurer
Munich Re has joined calls to delay the introduction of new accounting rules for insurers, according to the Financial Times.
The reinsurer said the new IFRS 17 rules, due to come into force in 2021, will be very expensive to introduce, and will be diffucilt to understand for the public and the media.
Munich Re’s intervention adds weight to protests earlier this year from Aviva, Legal & General and Prudential, who wrote to Chancellor the Exchequer Philip Hammond to object to the new rules.
IFRS 17 is designed to make insurers’ accounts more consistent globally, and to make it easier for investors to compare insurance companies. The new rules will also expose more clearly how good a company’s reserving record has been.
The changes will be less onerous for the UK’s non-life insurers than for life companies, and many of the practices they use today will be largely unchanged.
One of the changes under IFRS is that claims reserves will have to be discounted to take into account the time value of money – in other words the interest that the insurer could earn on the reserve over the time it is held.
Changes in interest rates could therefore have a bigger effect on insurers’ underwriting results and overall profit