The Future of European Insurance Financial Reporting and Credit Implications from IFRS 17
DBRS Morningstar has released a commentary discussing the impact of IFRS 17 on European insurance companies.Key highlights include:
-- The transition towards a different accounting regime should not lead to rating changes per se as, in our view, it does not affect the underlying credit quality of the issuers.
-- With the implementation of IFRS 17, insurance companies are moving towards a homogeneous accounting regime across a significant portion of the global industry, including the EU, the UK, and Canada.
-- As a result of the creation of a new liability, we expect that, on average, the shareholders' equity of the insurance companies could decrease, with an impact on return on equity and leverage ratios.
“In principle, we believe that the implementation of IFRS 17 should not affect the ratings of European insurance companies, although it will inevitably have an effect on how some financial metrics will be calculated going forward,“ said Mario De Cicco, Vice President, Global Financial Institutions at DBRS Morningstar.
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