2023 Insurance Liabilities Fair Value Assessment... Revision of Insurance Contract Standards

[Asia Economy Reporter Oh Hyung-gil] With the implementation of the new International Financial Reporting Standard (IFRS17), which centers on the fair value measurement of insurance liabilities, postponed to 2023, the Accounting Standards Board of the Korea Accounting Standards Board has revised the insurance contract standard.

The Financial Services Commission announced on the 1st that the Accounting Standards Board released a revised draft of the "K-IFRS No. 1117 (Insurance Contracts Standard)" on the 30th of last month.

Originally, IFRS17 was scheduled to be introduced in 2021 but has been postponed by two years to 2023. Reflecting this, the Accounting Standards Board revised the insurance contract standard. The core of the insurance contract standard is changing the valuation basis of insurance liabilities from cost to fair value.

Insurance liabilities are reserves accumulated by insurers to pay insurance claims to customers. Additionally, insurance revenue recognition will change from recognizing revenue upon receipt of premiums (cash basis) to recognizing revenue based on the coverage and services provided during each period (accrual basis).

The revised draft will collect external opinions until the end of December, and the Accounting Standards Board plans to conduct final deliberation and resolution in the first half of next year. Subsequently, after reporting to the Securities and Futures Commission and the Financial Services Commission, the insurance contract standard will be officially announced in the second half of next year.

The Financial Services Commission stated, "The announcement of the revised draft of the insurance contract standard will resolve market uncertainties regarding the timing of IFRS17 adoption and implementation in Korea," and added, "We will prepare thoroughly for the introduction of IFRS17 in 2023."