IFRS 17: No one size fits all?

Authored by John Bowers, Actuarial Product Director, RNA Analytics

It has been a long journey, but after many years in the making, a number of insurers made their first full set of reports in March of this year under IFRS 17.

The demands of the new reporting standard precipitated a swathe of digital transformation across the insurance industry in recent years, upgrading systems and infrastructure, as well as the skills needed by actuaries, and finance and IT teams to support these changes.

Following the disclosure of the first full set of annual IFRS 17 financial statements, it is only now that we can really start to see the results of those efforts.

The complexity of the new requirements has been widely acknowledged, with much discussion and debate had around the potential approaches to compliance with this wide-ranging set of new rules. Whilst the goal of the new standard has always been to bring greater comparability and transparency to insurers’ financial statements, it is clear that there is no ‘one size fits all’ when it comes to compliance.

Like other IFRS standards, IFRS 17 is principles-based, aiming to produce greater comparability while inherently leaving many areas open to interpretation and judgement. Time will tell if the original goal of flexibility in interpreting the true economic substance of insurance contracts will be compromised in the pursuit of uniformity in results.

Following the disclosure of the first full set of annual statements in Q1 2024, a report published by PwC in April provided some insight into the ‘front line’ impacts of the new standard so far, by analysing the disclosures made by 10 of the largest UK life insurers and 18 general insurance companies. 

Amongst the findings of the report are that, despite the disclosures being mandatory, there is still a high degree of divergence in approaches, calibrations, and in the level of granularity adopted. This is commensurate with our experience working with insurers across the globe, which told us early on that there were some cultural and regional differences in approaches, attitudes and drivers for the decisions taken – conversations that we will continue to have with clients as they continue to understand the impacts of their conclusions in this respect.

Just as we anticipated during the implementation period for the new standard, the process of IFRS 17 implementation will be very much an incremental one, and it is interesting to note that PwC’s report mirrors our findings, anticipating no wholesale changes, but instead pointing to a convergence in approaches or calibrations over time.

Given that PwC's analysis considered some of the biggest names in life and non-life, the report’s findings can be seen as representative of the approach taken by large, and in most cases, global insurance companies. Notwithstanding their size and access to resources, this group was seen to struggle with upskilling teams on new IFRS 17 systems and processes, and understanding the results fully. This is despite having invested quite heavily in in-house capacity – as RNA Analytics' own analysis showed was the case in the period during which preparations were ramped up ahead of the implementation deadline.

Many of the additional benefits of the digital transformations that were undertaken to ensure compliance with IFRS 17 (besides compliance itself) will be difficult to measure and to quantify in the short or medium term. The long journey to get insurers to where they are today has been for many a real journey of discovery, and the journey continues. At RNA Analytics, we have always considered the process of IFRS 17 transformation and implementation to be a long-term investment for our clients – a commitment not only to compliance and transparency, but also to long-term resilience and returns.

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