What significance will IFRS 17 developments have on today's insurers?
It will impact profit structures. There will be more openness in terms of profitability, and equity levels will be visible. If investors and stakeholders have a better understanding of an insurer's accurate financial results, they are more likely to change how they report and conduct business.
Here are some of the new features of IFRS 17.
- Only revenue, costs, and other operations related to insurance contracts are recognised
- Projected cash flow predictions can be more exact if premium claims and spending are taken into account
- Streamlining of reporting with less confusion and synchronisation of internal and external perspectives
- Insurance contracts and reinsurance contracts are not the same things
- Gain or loss from contracts of a specific entity is recognised in a broad group
- Enhances business collaboration and financial reporting position improvement
- Gives data by focusing solely on investment income
According to current accounting rules, the valuation of insurance contracts is frequently estimated using historical data and facts accessible at the start of the insurance period. IFRS 17 mandates a future-oriented evaluation based on best-estimate cash flows. It is more concerned with the revenue of portfolios. It specifies rules for identifying, assessing, displaying and disclosing insurance contracts.
The adoption of IFRS 17 will substantially impact financial reporting, particularly by assisting in resolving the current difficulty of various accounting procedures. Insurers will have to evaluate, comprehend, and apply the new standard to their insurance contracts and reporting in the future years, which will take a lot of time and energy. The needed substantial transformation programme will affect more than just the finance and actuarial teams, and its implications will need to be conveyed to various participants.
However, help is at hand. HLB’s IFRS advisers can help you understand the key complexities and application of IFRS 17. More information can be found here.