Market Overview

Best's Briefing: New Accounting Standard IFRS 17 Will Provide Enhanced Reporting


The new International Financial Reporting Standard (IFRS 17) could
provide better insight into underwriting performance and enable
comparisons to be drawn between insurers, according to a new A.M. Best

The Best's Briefing, "New Accounting Standard IFRS 17 Will
Provide Enhanced Reporting," notes IFRS 17 calculations aim to bring
consistency and comparability across the world, and is likely to provide
greater granularity. Following a long period of preparation and
discussion, the standard was published on 18 May 2017, with an effective
date 1 January 2021. However, in A.M. Best's opinion, this leaves
insurers with a relatively short period for preparation as they also
have to provide comparative figures for the previous year (2020) and
there have already been calls for a postponement to its implementation

Although IFRS 17 will impose a basic model that is applicable to all
jurisdictions for insurers reporting under IFRS, A.M. Best anticipates
there will still be some issues of comparability, especially when the
standard is first introduced. There are likely to be some areas of
interpretation, such as the determination of discount rates, and the
criteria on which segmentation of business will be based. With time,
those approaches are expected to converge and help comparability.

Carlos Wong-Fupuy, senior director, A.M. Best, said: "Companies will
have to differentiate clearly between insurance and investment profits,
which will provide additional key indicators to measure the performance
of long-term business. Particular situations where apparently strong
business positions are weakened by loss-making product lines will be
more easily identifiable. More detailed information can help determine
(re)insurers' enterprise risk management practices. A.M. Best expects
added refinement in the way that companies incorporate the enhanced
performance data in risk management. If there are any implications on
how capital is managed and on dividend policies, this may also have some
impact on the way analysts assess risk management."

A.M. Best states there is unlikely to be an immediate significant impact
on rated companies in a post-IFRS 17 world. A.M. Best's approach, in
line with its criteria framework, Best's Credit Rating Methodology
(BCRM), allows for adjustments where current accounting standards do not
necessarily reflect economic reality. This should minimise the ratings
impact from any volatility component exclusively attributable to
accounting mismatching.

To access the full copy of this briefing, please visit

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