PHI INS issued advisory dated Nov. 29, 2023, for insurance, professional reinsurance companies to provide comments on draft documents re application of PFRS 17.
Overview
Companies must apply PFRS 17 to audited financial statements (AFS) from Jan. 1, 2025; however, may opt to adopt PFRS 17 in preparation of AFS starting Jan. 1, 2023.
Supplementary information will be required in the financial statements for the periods ending Dec. 31, 2023, and/or 2024 concerning the subjects specified (annex A).
From Jan. 1, 2025, companies must prepare reportorial requirements as per annex B.
Effectiveness
Comments must be submitted by Dec. 14, 2023.
Mar. 2024 Circular Letter Finalized
On Mar. 4, 2024, PHI INS published the finalized circular letter on the application of Philippine financial reporting standard 17 – insurance contracts (PRFS 17) to the audited financial statements (AFS) and reportorial requirements of PHI INS.
A separate circular will be issued to cover the preparation of actuarial valuation report.
The circular takes effect immediately on Mar. 4, 2024.
Mar. 25, 2024 Impact Assessment
On Mar. 25, 2024, PHI INS issued advisory on the conduct of quantitative impact assessment (QIA) relative to the application of the PFRS 17 insurance contracts.
Prior to the implementation of PFRS 17, PHI INS found that it is necessary to conduct QIA using the PFRS 17- updated financial reporting framework (known as FRF).
The QIA aims to assess the potential impact of PFRS 17 implementation on the financial position and financial performance of the insurance companies.
Specifically, financial performance in relation to the solvency requirements of PHI INS.
The QlA templates include data gathering forms and qualitative questions to gain an understanding of the status of implementation and the accounting policy choices.
Jun. 2024 Submission Deadlines
On Jun. 5, 2024, PHI INS issued advisory on revised deadlines, to give insurance and professional reinsurance companies enough time to complete PFRS 17 QIA templates.
PFRS 17 quantitative assessment template and PFRS 17 qualitative/preparedness assessment template have specific deadlines for submissions covering 2024 and 2025.
Companies are instructed to upload completed templates on online uploading portal.
Oct. 17, 2024 Promulgation of Regulations
On Oct. 17, 2024, PHI INS announced the promulgation of the application rules of Philippine financial reporting standard 17 (PFRS 17) in audited financial statements.
All health maintenance organizations (HMO) shall adopt PFRS 17 starting Jan. 1, 2027.
HMOs shall disclose in the notes to the financial statements the disclosure requirements of the Philippine accounting standard 8 in relation to the new standards.
HMOs shall submit the PFRS 17 preparedness assessment report which aims to monitor the progress in the preparation for the PFRS 17 adoption from Jan. 15, 2025.
In addition, PHI INS stated MBAs shall disclose in the notes to the financial statements the disclosure requirements set out within the Philippine accounting standard 8.
Oct. 22, 2024 Comments on Modifications
On Oct. 22, 2024, PHI INS commented on the modifications in Oct. 17 circular above.
Reminded it modifies Circular letter 2022-12, defers PFRS 17 implementation from Jan. 1, 2025 to Jan. 1, 2027, and allows for HMOs' voluntary early adoption before 2027.
Applies to HMO agreements with membership-fee based benefits, or where the fixed prepaid fee is in the form of a membership fee where the risks are borne by the HMO.
PHI INS developing new prudential framework for HMOs, framework will align with PFRS 17 transition; introduced periodic PFRS 17 Preparedness assessment reports.
Nov. 2024 PHI SEC Adopt Deferral
On Nov. 25, 2024, PHI SEC said it approved the deferral of PFRS 17's effective date.
Given request to adopt deferral by PHI INS, in line with Oct. 17, 2024 circular letters.
MBAs and HMOs availing relief must prepare their audited financial statements (AFS) in line with PFRS, as modified by PHI SEC-approved financial reporting relief.
MBAs and HMOs opting to adopt PFRS must specify relief in financial statements.
All MBAs, HMOs must disclose impending adoption of PFRS 17 in the notes to the financial statements as required by the Philippine Accounting Standard (PAS) 8.
MBAs, HMOs must adjust financial statements to comply fully with PFRS standards once relief period ends, ensuring alignment with the standard accounting framework.
Entities for which impact of the deferral on financial statements is deemed immaterial, may still claim full compliance with the applicable financial reporting framework.
External auditors must draw attention to the adopted, modified PFRS framework in their opinion paragraph, include an Emphasis of Matter to highlight accounting basis.
The PFRS framework will form part of applicable financial reporting framework for preparing and filing general-purpose financial statements, as per revised SRC rule 68.
