IFRS 17 accounting standard: Insurance contracts
Final standard has been published and will be effective from 1 January 2021
Insurance companies have been waiting over a decade for a single global accounting standard that fits their unique and complex industry. Deloitte understands the insurance industry and its need to gain improved economies of scale and minimise duplication through mandated regulatory change.
What does it mean for insurers
On Thursday 18 May, the IASB published its new Standard on Insurance Contracts with the ambition of introducing a consistent and transparent financial reporting language across the global insurance sector. The path to implementing IFRS 17 will not be easy but it is fair to say that it carries varying layers of complexity for different insurers depending on the type of business they underwrite.
Some of the key impacts that will be felt across the sector, albeit more profoundly by insurers that write long term contracts are:
- Current profit profiles will be impacted as the timing of profit recognition driven by the new model will change for most products
- The ‘look and feel’ of Profit or Loss Statements will change to reflect the new metrics and presentation requirements
- New KPIs will emerge and interactions with current KPIs will need to be assessed
- Insurers will need to engage with their investors and key stakeholders in a timely fashion to take them along the journey
- A properly designed implementation plan is key in getting the most value out of your IFRS 17 spend
We encourage you to visit our Global IFRS 17 website for more detailed information on IFRS 17 technical requirements, summaries of the standard and technical papers.
How IFRS 17 will be introduced
The standard is effective for annual periods beginning on or after 1 January 2021 with early application permitted. Entities must apply the standard retrospectively unless impracticable in which case the modified retrospective approach or the fair value approach is applied.
The implementation of the standard is likely to bring significant changes to an entity’s processes and systems, and will require much greater co-ordination between many functions of the business, including Finance, Actuarial and IT.
Webcasts and publications
- Deloitte IFRS 17 webcasts
- Insurance ERM webinar - Preparing for IFRS 17 (with Tamsin Abbey from Deloitte as one of the speakers)
- Deloitte Global IFRS 17 website
- IAS Plus website
- General insurance: The wide-ranging implications of IFRS 17 (co-written by Alice Boreman from Deloitte)