After 20 years of discussion and debate, the new IFRS 17 accounting standard has emerged as a fundamental change in how insurance companies calculate and disclose information relating to insurance contracts. This will give users of financial statements a whole new perspective on the way in which insurance and reinsurance companies generate profits and create value.
Current areas of focus amongst insurers are predominantly technical, including:
- Implementation challenges (system changes, new data requirements and resource needs).
- Back-book transition (Contractual Service Margin calculation and data requirements regarding this).
- Stakeholder understanding of accounting standards and required developments.
While these are important, we believe that the consideration of business impacts of IFRS 17 should drive the subsequent implementation of the accounting standards and process design decisions, rather than the other way around. Accordingly, beyond the raft of technical considerations, there are some key strategic questions that Boards should be asking of their Executives.
