Office of the Superintendent of Financial Institutions
In June 2020, the International Accounting Standards Board (IASB) issued amendments to the IFRS 17
Insurance Contracts Standard (IFRS 17). IFRS 17 replaces IFRS 4 and is effective for annual periods beginning on or after January 1, 2023. The Canadian Accounting Standards Board will complete its endorsement process for the amendments, incorporating them into Part I of the CPA Canada Handbook – Accounting no later than November 2020.
Insurance Companies Act stipulates in the case of federally regulated insurers (FRIs)Footnote 1 that “financial statements shall, except as otherwise specified by the Superintendent, be prepared in accordance with generally accepted accounting principles, the primary source of which is the Handbook of the Chartered Professional Accountants of Canada.”Footnote 2 Generally, Accepted Accounting Principles for FRIs is effectively International Financial Reporting Standards as issued by the IASB. OSFI may specify additional accounting guidance or disclosure requirements, or require FRIs to use a specific option within an applicable accounting standard. OSFI makes these specifications in situations where there is a prudential need for additional accounting guidance.
To support FRIs in their transition to IFRS 17, OSFI is issuing this advisory regarding:
After reviewing several factors (e.g. consistency across insurers, operational capacity, etc.), OSFI determined that FRIs should not adopt IFRS 17 before its effective date of January 1, 2023.
Disallowing adoption before January 1, 2023 implies that FRIs that are subsidiaries of DTIs with an October 31 year-end will adopt IFRS 17 for annual periods beginning November 1, 2023. OSFI confirms this adoption date having considered the complexity of implementing IFRS 17 and the size of these DTI subsidiaries relative to the regulated DTI. DTI subsidiaries with a December 31 year-end will adopt IFRS 17 on January 1, 2023.
IFRS 17 provides existing insurers applying IFRS 4 the option to account for financial guarantee contracts using either IFRS 17 or IFRS 9
Financial Instruments. To ensure consistency and comparability across the industry, OSFI determined that existing FRIs should continue accounting for these contracts using IFRS 17.
OSFI will communicate any additional reporting requirements during the application process for new entrants after January 1, 2023. This will ensure comparability and consistency in reporting with existing FRIs.
OSFI is requiring FRIs to submit semi-annual reports outlining the progress made in preparation for IFRS 17. This advisory sets out OSFI’s expectations with respect to the contents of such reports.
FRIs are expected to submit semi-annual progress reports to OSFI on their implementation of IFRS 17. The reports will detail the status of the project and any material decisions made.
FRIs should submit progress reports semi-annually on or before:
FRIs that are subsidiaries of DTIs are expected to submit a final progress report no later than September 30, 2023.
OSFI expects FRIs to engage their senior management in the IFRS 17 work plan. Senior management should review and approve all material elements of the information provided to OSFI. Progress report information received from the FRIs will be considered confidential and treated accordingly.
The progress reports should include the following:
OSFI expects FRIs to keep their Lead Supervisor informed of any major changes or risks to the IFRS 17 project plan.
Indicate the status of key milestones of the project plan. For example, indicate if the project is on schedule, ahead of schedule or behind schedule. If behind schedule, indicate the steps being taken to bring the project back on schedule.
When evaluating project status, FRIs should:
Details should be included in the progress report based on the areas identified in section 3 below.
FRIs should provide a summary of the significant changes caused by the difference between IFRS 4 and IFRS 17. OSFI has identified the following accounting policy options affecting the FRI’s financial statements:
The progress report should comment on the above and on any other items that have a significant impact on the FRI’s financial statement balances (mainly on the Statement of Financial Position), recognition, classification, measurement, presentation or disclosure. Each report should provide the status and progress towards decisions made.
FRIs should update their assessment of the IFRS 17 impact on:
The information requested in sections 1 to 4 above may incorporateinformation by reference (e.g. from a pre-existing internal document). In suchcases, FRIs are expected to map the reference to the location where therequired information is available to OSFI. If information requested is notavailable in any given semi-annual period, the FRI’s report to OSFI shouldindicate when that information will be available.
Requiredinformation that has been reported in a previous progress report and thatremains unchanged from one reporting period to the next need not be repeated.However, the FRI should indicate that the information in question is unchangedfrom the previous report.
Has the FRI determined its accounting policies with respect to IFRS 17 including options and actuarial methods associated with?:
Other items of note for discussion:
Qualitative discussion (if necessary) of project:
FRIs refer to all federally regulated insurers, including Canadian branches of foreign life and property and casualty companies, fraternal benefit societies, regulated insurance holding companies and non-operating insurance companies.
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Subsections 331(4) and 887(4) of the
Insurance Companies Act.
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For the purposes of this Advisory, DTI refers to banks, foreign bank branches, bank holding companies, federally regulated trust companies, federally regulated loan companies, and cooperative retail associations.
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Instructions for quantitative data will be provided at a later date.
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