Following a 20 year process of development and consultation the new international accounting standard on Insurance Contracts is finally here.

On 18 May 2017, the International Accounting Standards Board released its new accounting standard, IFRS 17 Insurance Contracts.

Whilst IFRS 17 is a significant change for insurers across the globe, the principles embraced within the standard confirm that Australian insurance accounting has led the world for many years with its emphasis on fair value accounting. While the new accounting model embraces fair value accounting it will however provide insurers with more accounting choices which, in turn, will introduce more volatility to the profit and loss account.

Although better placed for the transition than foreign insurers, Australian insurers are not immune and will be impacted in many ways by the requirements of IFRS 17, including the way they report profitability and their financial position.

In our publication titled IFRS 17 – What it means for Australian insurers we examine:

• The key principles contained in the new standard – including the three methods that will be used to value all insurance contracts.
• The differences between the current Australian practice and the requirements of IFRS 17
  The greatest impact will be felt by life insurers, with lower deferral of acquisition expenses, the introduction of risk adjustments for reporting purposes, and a likely change in ‘boundary’ for certain contracts such as yearly renewable term insurance policies. For general insurers, the inclusion of the Premium Allocation Approach in the standard will allow them to adopt an accounting model not too dissimilar from what we currently operate with in Australia.
• 10 key issues that insurers and stakeholders will need to consider as they implement IFRS 17
  Technical matters aside, plans for the implementation of IFRS 17 will need to incorporate many strategic, operational and governance aspects, both internally and externally focused. We highlight 10 matters for you to consider as part of your implementation plan.

The publication also incorporates aspects of how IFRS 17 interacts with the requirements of other accounting standards affecting insurers, and the increasing reliance on Australia’s regulators for successful implementation of IFRS 17.