Question ID: 2746
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Topic: Technical Provisions (TPs)
Article: 9(1) and 28
Status: Final
Date of submission: 03 Aug 2023
Question
EIOPA has opined in questions (e.g. 2458) that statutory account analysis for IFRS reporters will follow IFRS 17 so far as concerns the balance sheet QRT. However, the responses have not addressed whether the Solvency II recognition of assets and liabilities will be affected by the adoption of IFRS 17. In view of Article 9(1) and the different treatment of past-due insurance debtors and creditors between Solvency II and IFRS as regards inclusion in technical provisions calculations, can EIOPA confirm how firms should resolve the conflict between the requirements of Article 9(1) and those of the Solvency II rules on valuation of technical provisions? In short, does EIOPA consider that C0010 on the S.02.01 template is affected by the introduction of IFRS 17 and if so how?
Background of the question
Article 9(1) of the Delegated Acts requires assets and liabilities other than technical provisions to be recognised in accordance with IFRS. With the introduction of IFRS 17, this suggests that past due contract cashflows must be derecognised, since IFRS 17 regards these as fulfilment cashflows and therefore to be included in technical provisions. That is inconsistent with the approach to valuation of technical provisions in Solvency II. It is necessary to decide which takes precedence - the requirement to follow IFRS for assets and liabilities such as insurance debtors and creditors, or the requirement to exclude past-due contract cashflows from technical provisions.
EIOPA answer
In some cases, the boundary between technical provisions and insurance / reinsurance receivables and payables is different in IFRS 17 and in Solvency II. Past-due insurance debtors and creditors within IFRS 17 insurance liabilities that are out of the scope of Solvency II technical provisions should be recognised as a separate asset / liability consistent with the economic nature of such cashflows and presented in the Solvency II balance sheet. Consistently, Solvency II technical provisions should include all the relevant cashflows according to Article 28 of Commission Delegated Regulation (EU) 2015/35 regardless of whether they are included in IFRS 17 insurance liabilities. Considering this, the introduction of IFRS 17 is not expected to change the amounts in S.02.01 C0010.