Highlights
Many insurers and analysts have hailed IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments as a positive accounting change, offering better comparability than IFRS 4 Insurance Contracts, aligning asset and liability measurement models and clearer presentation and disclosures in the financial statements. Some also believe that company valuations may increase over time due to the greater transparency under IFRS 17.
To consider insurers’ views in more detail, we have analysed information provided by 26 insurers across the globe on the potential impacts of IFRS 17 and IFRS 91. This information was shared as part of their investor education sessions and/or their quarterly or half-yearly reporting (where relevant).
Our analysis highlighted that insurers expect:
- IFRS 17 will have a significant impact but it is primarily an accounting change;
- accounting mismatches and related volatility in the income statement will be significantly reduced under IFRS 17 and IFRS 9; and
- the new standards will not affect a company’s strategy and its capacity to pay dividends.
What does our analysis show?
We set out our key insights in the table below. Our additional summary provides more detailed analysis on these and other areas.
What are global rating agencies’ expectations for insurers’ credit ratings?
Rating agencies do not expect material changes in credit ratings because they do not expect insurers' underlying businesses to change, despite the significance of the new standards. Similar to insurers, they also expect that it will take several years for stakeholders to become acquainted with the new numbers and related KPIs under IFRS 9 and IFRS 17. They note various options for presenting combined ratios in the non-life sector and financial leverage ratios more broadly.
What’s next?
Use our analysis to identify and benchmark the key information that you intend to provide in your next round of reporting. Also, with stakeholders expecting disclosures under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors on the expected impact of IFRS 17 and IFRS 9 in your 2022 financial statements, read our guide Insurers – reporting now and into 2023.
Some insurers have committed to providing the restated opening balance sheet in their 2022 annual reports and expect to issue first quarter results in May 2023. Others expect to include unaudited supplementary financial information on the impact of the new standards in separate IFRS 17 and IFRS 9 transition documents. As insurers share more detailed information on the new standards, we will seek to share more insights.
1 Many of the 26 insurers have applied the temporary exemption from IFRS 9 and expect to apply it at the same time as IFRS 17 – i.e. from 1 January 2023.
© 2024 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.