MANILA – The Insurance Commission (IC) has started the countdown for the nation’s insurance companies to transition to a new set of accounting policies that will make their financial reporting more transparent, especially to the investing public, and universally comparable.
During a webinar on the new accounting system held last week, IC Deputy Commissioner Ferdinand George Florendo said insurance companies could begin the move to the Philippine Financial Reporting Standard (PFRS) 17 – from current PFRS 4 – from January 2023 in time for industry-wide application in 2025.
Florendo said companies have enough time to complete the transition, as they need to modify their data administration, financial presentations and actuarial calculations.
Christian Lauron, partner at SGV & Co., said the new set of rules carries over policies from previous accounting rules, including on how to disclose insurance contracts that provide for a full calculation of the amount of insurance reserves. and how that would relate to areas like solvency. , as determined and assessed by actuaries and risk professionals.
The main difference between the PFRS 4 currently in use and the following PFRS 17 is that PFRS 4 is an intermediate standard that allows insurers to apply existing local generally accepted accounting principles, resulting in varying reporting practices for insurance contracts .
The new set of rules uses a single accounting approach that will provide more transparent and consistent information to managers, policymakers and the investing public.
“The industry will move from using different sets of accounting policies for insurance contracts to one common policy and allow insurance companies in all countries to better benchmark each other,” said Charisse Rossielin Cruz, Partner at SGV. & Co.
Florendo said it will also be easier for international investors to assess companies potentially available for investment or takeover through a common accounting system.
The country’s insurance industry recorded higher premium income last year at PHP 247.72 billion, up 5.9% from PHP 233.92 billion the previous year, while benefit payments registered a decline of 10% to PHP 69.36 billion.
This 10% drop was attributed to difficulties in processing, filing and paying claims due to certain community quarantine restrictions imposed by the national government to curb the spread of the coronavirus disease 2019 (Covid-19).
The closures also affected sales, with Total New Business Annual Premium Equivalent (NBAPE) also falling to PHP46.16 billion, down 19.8% from PHP57.56 billion in 2019.
The Insurance Commission attributed the drop in sales to restrictions on the face-to-face sale of insurance products.
Meanwhile, the industry’s paid-up capital rose to PHP25.28 billion in the pandemic year, up 7.66% from PHP23.48 billion in the previous year. while total assets reached PHP 1.53 trillion last year, an increase of 7.78% from PHP 1.42 trillion in 2019.
This can be attributed to the 6.72% growth in total industry investments, both in traditional and segregated funds, from PHP 1.39 trillion for the year 2019 to PHP 1.48 trillion l year, said the IC. (PR)