Further to the 2019 AASB 17 Readiness Survey, APRA issued a follow-up AASB 17 Implementation Survey in Q2 2021 to all insurers to assess the maturity of insurers’ preparedness for implementing AASB 17. APRA has stated that while progress has been made, there was still significant work required to be done. We expect this will become increasingly evident when APRA releases the industry wide AASB 17 Quantitative Impact Study (QIS) in November 2021.

In regard to the AASB 17 QIS, APRA provided informal feedback to the 13 participants in the 2020 Targeted QIS results during Q2 2021. APRA will issue a formal ‘release package’ at the end of the year which will include a response paper, draft capital standards and the 2021 full QIS. It is expected that all insurers (including friendly societies) will be invited to participate in the 2021 full QIS on a ‘best endeavours’ basis and for those who were in the 2020 Targeted QIS, it is expected that there will be an improvement on their prior best endeavours. The due date of the 2021 Full QIS is expected to be the end of March 2022.

This means that the amount of activity related to AASB 17 from APRA is expected to increase over the next year, with many insurers (in particular those with December year-end) potentially facing resource constraints to complete the 2021 Full QIS, while ensuring the overall AASB 17 implementation is progressing as planned. We would recommend that insurers plan to start on the QIS now, given the expectation is that there will be limited changes to the 2020 Targeted QIS.

A joint APRA / Actuaries Institute technical working group was established in June 2021 to help work through the specific issues impacting friendly societies, for example whether AASB 17 can be shown to meet the requirements of the existing regulatory framework of friendly society benefit and management funds. Friendly Societies will need to accelerate their AASB 17 implementation plans, or they will risk facing resource and cost challenges to meet the deadlines.

In July 2021, the G20 endorsed the Global Minimum Tax (GMT) rule, with a minimum effective tax rate of at least 15% to be introduced from 2023. Whether a top-up tax will apply under the GMT rule will depend on the insurer group’s effective tax rate calculated in accordance with the GMT rules in each jurisdiction where it has consolidated subsidiaries or branches. As insurers will transition to IFRS 17 in 2023, it is expected that insurers’ parent companies will be looking to local subsidiaries to confirm this effective tax rate under IFRS 17, which may require IFRS 17 projections.

The International Actuarial Association (IAA) has published the International Actuarial Note (IAN 100) on the application of IFRS 17 to insurance contracts. Our preliminary observation is that it is similar in content to the Actuaries Institute AASB 17 Insurance Contract Information Note v3.0 (IN 3.0) which sets out the interpretation of the standard, specifically where it relates to actuaries. The IAN 100 provides an alternative source of reference and guidance for actuaries practising in IFRS 17.

The Actuaries Institute has also released a Practice Guideline Exposure Draft (PG4) which is the Australian adaptation of International Standard of Actuarial Practice 4: IFRS 17 Insurance Contracts (ISAP 4) issued by the IAA. PG 4 provides guidance to actuaries performing AASB 17 services related to the preparation of an entity’s AASB financial statements.