Press Service

The Central Bank of the Russian Federation (Bank of Russia)

Press Service

12 Neglinnaya Street, Moscow, 107016 Russia;
www.cbr.ru

Information Notice

Preparation for implementing International Financial Reporting Standard Insurance Contracts

Following the publication by the Russian Ministry of Finance of the draft order ‘On the Introduction of the International Financial Reporting Standard in the Russian Federation’, which has been drawn up to recognise IFRS 17 Insurance Contracts (hereinafter, IFRS 17) in the Russian Federation, the Bank of Russia informs on the following.

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts. Meant to replace IFRS 4 Insurance Contract, it has an effective date of 1 January 2021 and provides for a possible calculation of balances as of 31.12.2019.

The standard constitutes the biggest change in the requirements for the European insurance accounting over past 20 years, implying a complete overhaul of financial reporting for insurers and non-governmental pension funds. Principles underlying the measurement methods of IFRS 17 will lead to radical changes in the current measurement practice, specifically for long-term insurance contracts. To ensure a timely and smooth integration of the Standard principles into the business model of insurance companies and non-governmental pension funds, the latter will have to grasp the essence of IFRS 17 provisions and clarify the potential consequences of the Standard’s implementation for their businesses, all this being a lengthy and extremely complicated process. Also, professional knowledge of the staff will have to be properly adapted for them to be able to accomplish their internal tasks and understand the requirements set forth by the new Standard.

It is assumed that IFRS 17 will produce a significant effect on the accounting and reporting data of Russian insurance companies and non-governmental pension funds, will require considerable efforts, will call for the implementation of new systems, processes and controls or the up-grade of the existing ones, will influence other activities of companies such as financial management, actuarial activities, IT infrastructure and legal support.

In view of the above, the Bank of Russia believes it advisable that insurance companies and non-governmental pension funds make preliminary assessment of IFRS 17 impact on their financial indicators.

04 June 2018

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