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Implementing IFRS 17 in South Africa

The key changes affecting South African insurers, and the practical implications for insurance reporting and wider functions.

IFRS 17 Insurance Contracts, the new profit-reporting standard for insurance contracts, has finally been published, ending many years of discussion, debate and lobbying. This comes just after the industry has had to implement the requirements of the South African Solvency Assessment and Management (SAM) regime, and many stakeholders are asking “What next?”.

Key takeouts from this report 

We have identified seven focus areas for South African insurers to consider when looking at the new reporting standards

  • Alignment of life and non-life financial reporting and changes to short-term vs long-term business classification;
  • Introduction of the explicit risk adjustment liability component; 
  • Introduction of the explicit Contractual Service Margin (CSM) liability component;
  • Limited level of cross-subsidy between groups of profitable and loss-making (onerous) contracts;
  • Valuing all future expected contract cashflows for life insurers; 
  • Implications of unbundling; where bundling a distinct investment or service component will not be permitted; and
  • Changes to reporting of reinsurance treaties.

Other implications for insurers include the interaction between IFRS 9 and IFRS 17, indirect introduction of a Deferred Acquisition Cost (DAC), changes to tax treatment, transition requirements, and presentation and disclosures.

What our experts say

To implement IFRS 17 will take substantial effort. While there are some elements of similarity between the current methods and those under IFRS 4, there are some significant differences. The implementation of these changes will require considerations beyond just the technical accounting and actuarial rules, and a solid understanding of the standard is needed by a number of broader stakeholders.

Andrew Warren, Director and IFRS insurance leader of Deloitte South Africa

How can Deloitte help

To help you on your journey to implementation, Deloitte has a wide range of impact assessment tools and simulations of the changes in the profit profile that will be caused by the new IFRS 17 accounting regime.
 

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