Document Properties
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Type of Publication: Letter
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Date: July 26, 2021
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To: Federally Regulated Financial Institutions (FRFIs)
OSFI remains committed to working with the industry and key stakeholders to support a robust implementation of International Financial Reporting Standard 17 -
Insurance Contracts (IFRS 17). This includes revised reporting documents and instructions, consultations on insurance capital adequacy tests, and a Quantitative Impact Study. This work was described in
September of 2020, and more recently in OSFI’s
updated forward policy planner and
OSFI Pillar.
The guidelines referred to in this letter have been identified as requiring amendments or rescinding to reflect the adoption of IFRS 17. OSFI reviewed all insurance related guidelines and determined that very few may require revisions to reflect IFRS 17.
OSFI is seeking feedback on the proposed consequential changes to existing guidance as a result of IFRS 17. Annex 1 provides a summary of the guidelines, effective dates and rationale. Annex 2 provides a list of guidelines that may be part of a separate track and considered out of scope for this particular consultation.
The rescinding of OSFI guidelines as a result of IFRS 17 will occur on December 31, 2023. The rescinding date reflects the various adoption dates by institution based on the FRI’s year-end. The effective date of IFRS 17 is for annual periods beginning on or after January 1, 2023 (the “IFRS 17 Effective Date”). However, those insurance subsidiaries of Federally Regulated Deposit-Taking Institutions (DTIs) with an October 31 year-end have an adoption date of November 1, 2023.
Please provide feedback/comments on the proposals in this letter by no later than September 15, 2021. In particular, we would like to have feedback on:
- Potential risks with the proposed deletions and amendments.
- The appropriateness of the text of proposed changes.
- Other suggestions for guideline amendments not already in progress that may require further refinement to reflect IFRS 17 or IFRS 9.
Questions and comments about this letter can be sent by email to
IFRS17rev@osfi-bsif.gc.ca.
Sincerely,
Ben Gully
Assistant Superintendent,
Regulation Sector
ANNEX 1 – Summary of Guidelines to be Rescinded or Amended
Guidelines to Rescind
OSFI determined that a number of its guidelines may not be necessary following the adoption of IFRS 17 and
IFRS 9 by all FRI’s. The following guidelines, if rescinded, would no longer be in effect for annual periods beginning on or after the IFRS 17 effective date. However, they will remain effective for annual periods prior to that date and will be removed from OSFI’s website in December of 2023.
The content of these guidelines will primarily be superseded by guidance already contained in OSFI’s IFRS 9 Guideline or in other accounting and disclosure requirements resulting from IFRS 17 reporting.
Guidelines to Amend
The following guidelines will require the finalizing of amendments in advance of the implementation deadline; however, they would remain in force, and be effective for annual periods beginning on or after the IFRS 17 Effective Date.
The D-5 guideline contains reference to the superseded standard IFRS 4, which will be updated to reference IFRS 17. The IFRS 9 Financial Instruments and Disclosures guideline will replace the following:
- D-1A (replaced by IFRS 9 Financial Instruments and Disclosures Section 3.1);
- D-1B (replaced by IFRS 9 Financial Instruments and Disclosures Section 3.2);
- D-6 (replaced by IFRS 9 Financial Instruments and Disclosures Section 3.3); and
- D-10 (replaced by IFRS 9 Financial Instruments and Disclosures Section 1.IV).
IFRS 9 Financial Instruments and Disclosures Section 1.IV will also update the Fair Value Option annual gross revenue threshold from $62.5 million to $75 million. This aligns with OSFI’s 2023 Draft Capital Adequacy Requirement guideline definition of Small and Medium-sized Entity borrowers in Chapter 5, paragraph 68. Furthermore, the IFRS 9 Financial Instruments and Disclosures guideline includes the following additional guidance: Section 2.3 - Impairment guidance applicable to Life Insurers. Notably, the guidance states that OSFI expects life insurers to limit their use of the more-than-30-days-past-due rebuttable presumption in IFRS 9 paragraph 5.5.11, as a primary indicator of transfer to lifetime Expected Credit Loss (ECL) measurement for material loans. OSFI believes that this guidance will promote sound credit risk practices associated with the implementation and on-going application of the IFRS 9 ECL accounting framework for life insurers.
| Guideline | Rationale |
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D-5 -- Accounting for Structured Settlements | Reference to IFRS 4 will be amended. |
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IFRS 9 Financial Instruments and Disclosures | Section 1.IV will update the Fair Value Option annual gross revenue threshold to $75 million, which aligns with OSFI’s 2023 Draft Capital Adequacy Requirement guideline definition of Small and Medium-sized Entity borrowers in Chapter 5, paragraph 68.
Added Section 2.3 - Impairment guidance applicable to Life Insurers to promote sound credit risk practices associated with the implementation and on-going application of the IFRS 9 ECL accounting framework for life insurers. |
ANNEX 2 – Guidelines considered on separate track
There are a few other guidelines that are being revised and updated as part of other projects and are out of scope for this particular consultation.
Guideline