IFRS 9 and 17: a practical guide for insurance asset management

In the wake of the collapse of Silicon Valley Bank, accounting standards made global headlines¹ as stakeholders began once again to question the suitability of “hold-to-maturity” accounting for debt securities under US accounting rules. For IFRS account users and preparers, however, this is no longer a debate. Long in the making, IFRS 17 is finally effective as of 1 January 2023, and with this ends insurers’ temporary exemption from IFRS 9.

Fair value accounting lies at the heart of IFRS 9. In fact, the key word on both sides of the new insurance balance sheet is “economic”. With both liabilities and assets now (to a large extent) marked to market, some insurers are understandably concerned about the volatility this might bring to their financial results.

In light of recent market events, we can understand this reflection of economic volatility as by design, and with a tangible objective: to strengthen risk management. As insurers’ economic, regulatory and accounting balance sheets start to converge under the new IFRSs, standard setters are effectively encouraging insurers to now manage their assets and liabilities in a more economic way.

In this article, we offer our thoughts on what this might look like for an insurance investor practically.

¹Source: Reuters, Silicon Valley Bank’s Failure Sparks Speculation that FASB Accounting Rules for Held-to-Maturity Debt Securities Should be Revised, March 2023.