The Impact of IFRS 17 on Insurance and other relevant entity

This is in continuation of Article from Linkedin, to include more detail informations..

IFRS 17 will radically change the outlook of financial calculations of insurances.

• It will shed more light on the analytical competency and enhance how analysts interpret and compare the financial outcome of different companies. By bringing new perspectives, it globally optimizes insights on comparability and transparency to magnify the insurer’s financial health.
• It will be an effective solution against the contingencies in equity and financial results. There will be more precariousness if you continue to use the discount of the current market, as it will vary dramatically. With IFRS 17, the accounting mismatches can be abridged, and it instantly increases the visibility of all economic mismatches between assets and liabilities.
• With the introduction of IFRS17, the fundamentals of financial systems of measurements will also vary. Investment factors and money received will not be classified as revenue.
• IFRS17 will also bring a better performance evaluation, as the investment income and risks will be displayed separately from the insurance performance report to get a precise understanding of the profits.
• In the case of life insurers, major accounting modifications instigated if they are using the current discount rates and by the end of the ‘locked-in predictions. The hurdles of minimum interest rates and the time taken for the value will become more open clear.
• Non-life insurers need an in-depth analysis of the requirements for PAA qualification to hold on to their preferred accounting framework. With IFRS
• the reduction of liabilities will be a noteworthy change compared to the existing practice.
• IFRS 17 will bring new routines to life insurers and non-life insurers to identify and account for arduous agreements and show a well-cut margin for non-financial risk. There will be a separate model for accounting for reinsurance and direct insurance, which will significantly impact the companies.
• Under IFRS17, companies need to remodel KPIs and help internal and external users understand the new model; how performance is measured will change considerably. This will bring the challenge of communication and consume more time.
• Due to the different time horizons that the insurers operate and the continual use of the traditional system, there will be challenges in terms of new data, updated systems, and control demands. Companies need to change the existing systems and formulate different upgraded systems to pave the way for a smooth transition. They need to control it efficiently without delay.

10. It will bring more employment opportunities as the human resource needed to operationalize and implement IFRS 17 is significantly high. It also puts scarce resources under strain.

Major Changes of IFRS17

Parallel to IFRS 4, IFRS 17 concentrates on the various types of contracts instead of different entities. This, in turn, means that the new model applies to all entities, despite insurance entities or not. Other standards for products that do not come under insurance contracts are also pertinent to the insurers. Suppose any entity is initiating IFRS to its contracts. In that case, the general principle is that it should be applied to the insurance or reinsurance contracts that it allots or to the reinsurance contracts that it retains.
The ways in which you handle data – harnessing, analyzing, and using data-will alter under the conditions made by IFRS 17. There is a requirement for very meticulously detailed data-informed reports on each of the insurance agreements. Prior to this, most contracts asked for the calculation of the contractual service margin (CSM) that included all the attuned risks, discounted, future cash incomes, and investment components.
Data interpretation using traditional systems is often contaminated with other pieces of information and is then transformed, evaluated, and used in different reports. Data lineage enables you to trace the data to identify its source and the changes that impacted the data, where these changes have been made, and why it is modified. The golden ticket of IFRS 17 is that it allows you to do the data lineage effectively without errors and delay. It automatizes how you handle the data. It will be difficult to manage data manually, and you may require other BI groups to do it.

Manage the IRFS 17 compliances efficiently with Gotaxfile!

These are some of the few changes and impacts that IFRS can bring universally to the accounting model. Managing and adapting to the changes is quite a complex task, but not with Gotaxfile. Gotaxfile provides you assistance with the ever-changing financial framework. Our expert accountants understand the intricacies of IFRS and identify all the modifications that should be bought into your platform. So pull yourselves together to unlock the new face of IFRS17.