First impressions out now.
The comprehensive new accounting model in IFRS 17 will give users of financial information a whole new perspective on insurers’ financial statements.
Preparing for and applying the new standard will require substantial effort and present particular challenges – not least in implementing new or upgraded systems, processes and controls.
Our First Impressions: IFRS 17 Insurance Contracts (PDF 1.6MB) will help you assess the impacts and prepare for transition. It explains the key requirements with the use of illustrative examples and features KPMG’s insights.
Our SlideShare presentation provides a high-level summary the requirements and the possible impacts.
"The greater comparability and greater transparency that IFRS 17 provides should be a clear benefit to analysts and users of financial information.”
Gary Reader, KPMG’s Global Head of Insurance
Increased transparency about the profitability of new and in-force business will give users more insight into an insurer’s financial health than ever before.
These have the potential to reduce the cost of capital for leading insurers. Greater comparability could facilitate merger and acquisition activity, encourage greater competition for investment capital and help gain the trust of investors.
At the same time, there are likely to be a number of other effects. For example, there could be greater volatility in financial results and equity due to the use of current market discount rates. Insurers may also need to revisit the design of their products and other strategic decisions, such as investment allocation.
The impact of the new standard will vary significantly between insurance companies. Implementing it will require substantial effort, and new or upgraded systems, processes and controls.
The task will be even more challenging given the long time horizons over which many insurance companies operate and the legacy systems that many still use.
“There will be no ‘one-size-fits-all’ effect for insurers. But every insurer is certain to see impacts on its reported numbers in one way or another. Their significance will depend on an insurer’s previous accounting policies – which have differed across jurisdictions and, in some cases, even within jurisdictions.”
Joachim Kölschbach,KPMG’s Global IFRS Insurance Leader
While IFRS 17 represents the biggest accounting change for insurers in many years, the impacts will be felt far beyond accounting, in areas such as finance, actuarial, IT and even the regulatory departments.
“In general, the more insurance products that are offered, and the more jurisdictions that an insurer operates in, the more costly and time-consuming implementation will be – but so too is the potential to benefit from the changes. For the confident, change is opportunity.”
Mary Trussell,KPMG’s Global Insurance Accounting Change Leader
IFRS 17 takes effect in January 2021. That may seem a long way off, but the timescale will be a challenge for many. A co-ordinated response will be essential. Finance, Actuarial and IT functions will need to work closely together like never before. You need to start the implementation process now. Companies should start with an initial impact assessment, then move onto analysing their insurance contracts for product-by-product impacts.
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