The Insurance Commission said (IC) insurance companies may start shifting to a new set of accounting policies that will make their financial reports more transparent and universally comparable, especially for the investing public, beginning January 2023, according to a statement released by the Department of Finance (DOF) yesterday.
Ferdinand George Florendo, IC deputy commissioner, said insurance companies may start the shift to Philippine Financial Reporting Standard (PFRS) 17 — from the current PFRS 4 — by the said date, in time for the industry-wide application in 2025.
Florendo also said in a recent webinar the firms are given enough time to complete the transition as these need to change their data administration, financial presentations and actuarial calculations.
In the same event, SGV & Co. partner Christian Lauron said the new set of rules carries on policies in previous accounting rules, including that on how to disclose insurance contracts that provide for a comprehensive calculation of the amount of insurance reserves liabilities and how it would relate to areas like solvency, as determined and assessed by actuarial and risk professionals.
The DOF said the main difference between the currently used PFRS 4 and the succeeding PFRS 17 is that PFRS 4 is an intermediary standard which allows insurers to apply existing local generally accepted accounting principles resulting in diverse practices for reporting insurance contracts.
The new set of rules meanwhile uses a single accounting approach that will provide more transparent and consonant information for managers, decision makers and the investing public.
“The industry will transition from using different sets of accounting policies for insurance contracts to one common policy and allow insurance companies across countries to become better comparable,” Charisse Rossielin Cruz, partner at SGV & Co., said.
Florendo added it will also be easier for international investors to assess companies potentially available for investment or buy-out given a common accounting system.
The DOF said the country’s insurance industry reported a higher premium income last year at P247.72 billion, up by 5.9 percent from P233.92 billion in the previous year, while benefit payments recorded a 10 percent drop to P69.36 billion.
This 10 percent decline was attributed to difficulties in the processing, filing and pay-out of claims as an effect of certain community quarantine restrictions imposed by the national government to curb the spread of the coronavirus.
The DOF said the lockdowns have also affected sales as total new business annual premium equivalent also dropped to P46.16 billion, lower by 19.8 percent from P57.56 billion in 2019.
The IC has traced this sales drop possibly to restrictions on face-to-face selling of insurance products, the DOF said.
