Francesco Nagari, global International Financial Reporting Standard (IFRS) insurance leader at Deloitte, says, “The publication of IFRS 17 marks a once-in-a-lifetime regulatory change in accounting for insurance policies. The new rules aim to bring greater transparency in the financial reporting of an industry whose accounts have often been labelled as a ‘black box’. A single accounting language for insurers should aid comparability across countries where currently various national practices apply.”
To implement IFRS 17 will take substantial effort. The measurement of insurance liabilities will reflect market interest rates and the impact of policyholders’ guaranteed benefits. The revenue from insurance policies will be reported systematically over the coverage service period. The expected profit from the remaining coverage service period will be explicitly reported as a component of the insurance liability.
Andrew Warren, director and IFRS insurance leader at Deloitte South Africa, adds, “This new effort will likely generate implementation costs for many insurers as large as those incurred for the adoption of the Solvency Assessment and Management (SAM) regulations.” Deloitte estimates SAM cost South African insurers between two and three billion rand.
“We see this effort to be higher for life insurers than general insurers. The long-term coverage underpinning life insurance policies, together with the more common presence of options and guarantees in life-policies, will require a much more granular set of accounting and actuarial data,” concludes Warren.