Fundamental differences with Solvency 2 | KPMG | CY

Fundamental differences with Solvency 2

Fundamental differences with Solvency 2

Systems and processes will require additional development under IFRS 4 Phase 2. Even for those who recently implemented Solvency ll.



Related content


What's new?

The impact of IFRS 4 Phase 2 on an insurer’s operating model will depend a number of factors, such as its current reporting basis; the complexity and maturity of its business; whether it has recently undergone a major finance transformation; or the extent to which it has complex legacy systems.

In Europe, insurers have made significant investments in new systems to comply with Solvency II, and many might expect that their newly-developed systems and processes will require little additional development in order to meet the requirements of IFRS 4 Phase 2. However, there are some fundamental differences that insurers who have implemented Solvency ll must be aware of.

Differences insurers from Solvency 2 must be aware of

  • The requirement to calculate and maintain a contractual service margin (CSM), except where the premium allocation approach (PAA) is used.
  • The need to allocate the risk adjustment (RA) at a more granular level.
  • The challenges of calculating the insurance contract revenue measure.
  • The need to analyse movements in fulfilment cash flows between those that will be presented in profit or loss, in other comprehensive income (OCI), or off-set against the CSM.

For those companies that have not had to implement Solvency II, IFRS 4 Phase 2 will typically pose an even greater implementation challenge. 

© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Connect with us


Request for proposal