The insurance contracts standard requires important choices to be made that can have significant impact on company financial statements creating volatility in results, and need to reflect commercial practices, argue Shasat’s Michael Winkler and Sunil Kansal FCA
IFRS 17 Insurance Contracts requires a much higher level of detailed information than any existing accounting standard and any regulatory framework including Solvency II. Portfolios must be split depending on their type of business, their expected profitability, and their respective underwriting year. This split has to be maintained for many years.
The priority for many companies is, therefore, to enable their IT systems to provide and ‘maintain’ the required granular data. This is a very challenging task on its own but there are other implementation challenges.
IFRS 17 is a principle-based standard. Therefore, many parts are not prescriptive, and companies can make various choices on the detailed implementation. However, the final outcome – the future annual results – will heavily depend on these choices.
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