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ICA seeks faster APRA action on accounting changes

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The Australian Prudential Regulation Authority (APRA) should consider picking up the pace on its integration of new accounting standards into capital reporting requirements, the Insurance Council of Australia says.

The new accounting standard AASB 17 is due to start in January 2022 while APRA intends insurers would start reporting capital requirements to it using the new base from July 1 the following year.

ICA says maintaining dual accounting systems during the transition period would lead to extra costs.

“To mitigate these costs, we would encourage APRA to explore alternatives that could accelerate the timing for integration,” it says in a submission.

“This could include the incorporation of trial reporting on an AASB 17 basis ahead of the effective date to provide APRA with sufficient comparative data to bring forward the commencement date.”

The AASB 17 rule changes include requiring insurers to distinguish groups of contracts expected to be profit making and loss making.

APRA says it is also considering the “granularity of its reporting groups”, raising insurer concerns that they will face significant extra work in addition to the accounting rule implementation.

ICA has called for early clarification from APRA on its plans and says any changes should not require permanent dual modelling and accounting.

The final details of the accounting standard remain uncertain, and APRA says the outcomes may affect its plans for integration into the Life and General Insurance Capital (LAGIC) framework.