The European Financial Reporting Advisory Group has written to the European Commission recommending a delay to the review of the IFRS 17 annual cohort exemption. EFRAG advises holding the regulatory review until the International Accounting Standards Board completes its own post-implementation assessment.
Timeline Mismatch Between EU Review and IASB Process
The exemption was introduced in November 2021 through an amendment to Regulation (EC) No 1126/2008. It allows European Union insurers to omit the requirement to group intergenerationally-mutualised and cash flow matched contracts into annual cohorts under IFRS 17 Insurance Contracts.
Existing European regulation requires the European Commission to evaluate this exemption by 31 December 2027, taking into account findings from the IASB post-implementation review. However, discussions within the IASB regarding the start date of its review are anticipated to begin only in the fourth quarter of 2026. EFRAG notes that the IASB is therefore unlikely to finish its assessment in time for the Commission to properly incorporate the conclusions before the 2027 deadline.
Preventing Operational Disruption for Insurers
The annual cohort exemption sees extensive application among insurance entities across the European Union and the European Economic Area.
EFRAG cautions that altering or revoking the exemption before the IASB concludes its post-implementation review risks causing unnecessary disruption and imposing substantial administrative costs on the insurance sector.
