IFRS 17 is a new accounting standard that will come into effect in January 2023. This standard will have a significant impact on the way insurance companies operate and report their financial results.

It is arguably the most complex IFRS issued to date. However, it is important to remember that the challenges inherent in insurance accounting necessitated the development of such a complex financial reporting standard. The features of insurance business that create the accounting challenges include:

• The long duration of many insurance contracts
• The uncertainty surrounding future events which are insured against (e.g., death, accidents, etc.)
• The need for actuarial estimates in order to calculate premiums and reserves

Given these challenges, it is not surprising that IFRS 17 is a complex standard. However, it provides much needed guidance on how to account for Insurance Contracts and will ultimately improve financial reporting in this area.

This article will take a look at some of the key changes that IFRS 17 will bring about, why your insurance company needs to be prepared for them, and how to get prepared.

The IFRS 17 Changes

One of the biggest changes under IFRS 17 is the way in which premiums are accounted for. Currently, premiums are generally recognized as income when they are earned, but under this new accounting standard, they will need to be deferred and recognized over the policy term. This change will have a major impact on reported profits, as well as on solvency ratios and other key metrics used by insurers.

Another key change under IFRS 17 is the treatment of claims expenses. Under current rules, these expenses are generally treated as an adjustment to premium revenue when they occur (i.e., “incurred but not reported”). However, under IFRS 17 claims expenses must be recognized when incurred (i e.,”reported”), regardless of when they are paid out by the insurer. This change could also have a significant impact on profitability, particularly for those insurers with long-tail business lines such as workers’ compensation. Claims handling processes and systems will need to be updated in order to comply with this new requirement.

Ultimately, compliance with IFRS 17 will require significant efforts from insurance companies, but it will also provide them with greater transparency and comparability which will benefit both investors and policyholders alike.

How to Prepare for IFRS 17

There are a few things insurers can do to get prepared for IFRS 17 as the deadline quickly approaches:

• Familiarize yourself with the new standard.

There are many resources published online on IFRS 17. Study them to understand how it will affect your company’s financial reporting. We also have a team of experts that can guide you and explain the key changes in detail. Reach out to us and we’ll assist you.

•  Review your current contracts and policies to see if they need to be updated in light of IFRS 17.

For example, some insurance contracts may need to be re-priced under the new standard. Make sure you have a plan in place for updating any affected contracts before January 2023.

• Assess how much data you will need to comply with IFRS17 requirements.

The new standard requires more detailed information about underlying assets, so start collecting this data now if you don’t already have it on hand.

• Work with your software vendor.

If your accounting software doesn’t currently support IFRS17, start talking with your vendor about upgrading or finding a replacement that does meet the new standards. If Turnkey Africa is your vendor, reach out to us to get started with implementation.

• Get help from an expert.

Implementing any major change can be daunting, so don’t hesitate to seek out professional help if needed. We have a team of IFRS experts ready to assist you.

Turnkey Africa Is Helping Insurers to Implement IFRS 17

To ensure compliance in the industry, Turnkey Africa Limited has taken a proactive step to ensure that implementation of the standard is smooth come January 2023. Through our TurnQuest OnPremise or TurnQuest Cloud solution, we will help you implement IFRS 17 by:

• Creating an IFRS 17 gateway that transforms data (includes data cleanup and cleansing for accuracy purposes) from TurnQuest and feeds the data to your preferred IFRS 17 engine.
• Providing the ability to consume data from the insurer’s IFRS 17 engine.
• Providing the ability to transform IFRS 4 balances to IFRS 17 accounts.
• Providing the ability to generate IFRS 17 compliant reports like (Trial Balance, Revenue Statement, Cash Flow statement and Revenue statement)

Need help to start implementing IFRS 17? Our team of experts can help you comply with the new standard and avoid any penalties. Please send an email to info@turnkeyafrica.com to get started!