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IFRS 17: A Significant Change for the Global Insurance Industry

The new accounting standard for insurance contracts, better known as the International Financial Reporting Standard 17 (IFRS 17 or the Standard) will come into force on January 1, 2023. Most G20 jurisdictions will apply IFRS 17 with the exception of five member countries—the United States, China, Japan, India, and Indonesia—that account for approximately half of global GDP. IFRS 17 aims to decrease the jurisdictional variations in accounting practices and assumptions used in measuring and reporting on insurance contracts.

Key highlights include the following:

-- IFRS 17 will come into force on January 1, 2023, affecting insurers based in IFRS jurisdictions.
-- Insurers will need to devote considerable effort to explaining and communicating IFRS 17 changes to their stakeholders.
-- IFRS 17 adoption should not affect insurers' credit ratings since it is not expected to change the economics of the business model.

“IFRS 17 implementation, in addition to affecting internal systems and processes, will result in changes to financial statements and performance metrics,” said Nadja Dreff, Senior Vice President, Insurance. “The new Standard presents implementation challenges and requires significant financial and human resources for successful adoption. The impact of IFRS 17 changes varies based on insurers’ jurisdictions and their existing practices. However, since accounting changes are not a driver of credit ratings, DBRS Morningstar expects that insurers' credit ratings will not be affected as a result of IFRS 17 adoption.”