How can insurers make the most of the extra year for IF - KPMG Bulgaria
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How can insurers make the most of the extra year for IFRS 17 implementation?

How can insurers make the most of the extra year for IF

The new Insurance accounting standard will require significant implementation efforts and may result in more than just accounting changes.

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Svilena Whitney

Senior Manager, Audit

KPMG in Bulgaria

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Some insurers, for example, may need to re-visit the design of their products and even go further and re-examine strategic decisions such as investment allocation and resourcing. Others comment that they would need more time with their software providers to test, validate and configure the respective solutions.

Now that insurers have an extra year to implement IFRS 17 as a result of the proposed one-year deferral to 2022, they should make the most of this window of opportunities to pace their plans and efforts.

What is changing?

Here are some of the ways in which IFRS 17 will impact insurers:

  • The top line of the profit or loss of an insurer will change: it will not be premiums anymore, but a new defined insurance revenue.
  • Where an entity recognises premiums in profit or loss as received, significant changes in its profit patterns may result since under IFRS 17, profits are deferred and recognised over the coverage period of the contract.
  • Where an entity uses discount rates determined at contract inception for measurement purposes throughout the entire coverage period, greater volatility in financial results and equity may arise due to the use of current market discount rates under IFRS 17. 
  • Where an entity includes financial impacts within its insurance, i.e. underwriting results, these will now have to be separated out such that users will have added transparency about the sources of profits and quality of earnings. 
  • Due to these changes and others, equity levels are sure to change.

How to make the most of the extra year?

The one-year deferral is not simply a rewinding of the clock. It proves a chance for agile insurers to re-focus efforts on where they are needed the most. Here are some of the key actions to set the course on the right track:

  • Completing an initial assessment of the gaps and impacts of IFRS 17
  • Reviewing their insurance portfolios
  • Planning which accounting policy decisions to leverage to alleviate accounting mismatches and volatility
  • Planning what their resource needs will be, including IT, actuarial, finance, risk management, underwriting over the implementation period
  • Understanding local and Group responsibilities, if they belong to a Group.

How KPMG can help

The approach we take is tailored to help answer the questions that are important to each specific insurer. We bring deep market insights and experience of the global KPMG network to accelerate thinking in the most complex aspects of the new requirements. And we always emphasise that there is no “one size fits all” solution in order to enable clear communication of the issues that matter to you.

To learn more about how KPMG can help unlock value from your IFRS 17 programs, get in touch with us.

Svilena Whitney, Insurance Lead, presented the topic at the 2019 KPMG Client Business Seminar. 

© 2019 KPMG Bulgaria EOOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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