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Impact of IFRS 17 on future performance management

Impact of IFRS 17 on future performance...

The new requirements introduced by IFRS 17 will lead to changes in performance measurement.


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In developing the illustrative presentations and disclosures found in Opening the black box: Demystifying IFRS 17, we identified a number of sources of potentially new information that will be available to users of insurance company financial statements.

What’s new?

  • The movement analysis will provide new and useful information about the drivers of changes in insurance contract assets and liabilities and the development of the risk adjustment (RA) and the contractual service margin (CSM) over the reporting period.
  • The CSM (net of any losses) recognized on the initial recognition of contracts will provide a measure for the value added by new business that could in time replace existing performance measures computed using embedded value or regulatory-based measures.
  • The RA and CSM included in the measurement of insurance contract assets and liabilities and the explanation of when the remaining CSM is expected to be recognized in profit or loss will provided valuable information about the quantum and timing of the recognition of future profits arising from existing business.

Other factors to consider

For contracts measured using the building block approach (BBA), insurance contract revenue is unlikely to become a key performance measure. However, for most life insurers, written premiums, which it will replace, is not widely used as a measurement of performance.

While short-duration contracts measured using the premium allocation approach (PAA), insurance contract revenue will be similar to earned premium and will, most likely, replace earned premium as a key performance measure. Written premiums will no longer be presented on the face of the statement of profit or loss and other comprehensive income (SOCI), and in time, might become less widely reported as a key performance measure for short-duration contracts.

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