South Korea began full-fledged preparations Wednesday for a new global accounting regulation on insurers to take effect in the early 2020s.
The International Accounting Standards Board is scheduled to introduce the rule, called IFRS17, on the accounting of insurance products in 2021 with detailed guidelines to be issued in May.
A composite photo on insurance services provided by Yonhap News TV (Yonhap)
Under the rule, insurers' liabilities will be assessed on the basis of market value, instead of book value, at the time of a contract.
It's expected to enable a much "fairer" assessment of insurers' ability to withstand stress and also force them to have more capital bases and reserves to cover potential losses.
But it will add to insurers' burden to raise their capital base.
"As the implementation of the long-debated IFRS17 has been materialized, it has become a task to be no longer delayed," Kim Hak-kyun, a standing member of the Financial Services Commission, said at a "kick-off" meeting of a government-civilian committee on the issue.
The introduction of the new accounting rules is expected to serve as a chance for the insurance industry to focus on "quality-oriented" growth, not quantity based, he added.
The preparatory panel includes the industry advisory group of the CEOs of 38 insurance firms, a band of experts and a working support team.
It's tasked with exploring ways for local insurers to cushion short-term financial impact from IFRS17 and improving their accounting system. (Yonhap)