IFRS 17 : Implementation Revue

Faced with a future multi-standard context and the high operational cost of the developments required to implement IFRS 17, a major challenge for insurers is to reconcile the accounting standard with the Solvency 2 prudential framework and, to a lesser extent, the calculation of the MCEV, in order to rely on elements of convergence that would facilitate the implementation of IFRS models. The objective is particularly difficult to achieve as, initially, the two frameworks have very different scopes and some elements are purely specific to each of them.

Indeed, the IASB proposes techniques specific to the IFRS 17 accounting framework and for which no convergence with Solvency 2 seems possible: for example with the consideration of the mirror approach for participating contracts, the calculation of a margin on contractual services, or the introduction of the OCI option « allowing in particular to limit the volatility of the insurer’s result (P&L).

These novelties complicate the task of insurers as their implementation seems to be onerous at first sight, be it in terms of data collection and processing, calculation time but also sometimes understanding, as with the mirror approach, the calculation of the WSC and the transition which many market players consider to be complex at their scale.

It therefore appears that IFRS 17 is a very complex but essential project for insurers worldwide, who will have to adapt to new mechanisms and be able to provide analyses that are consistent with the other standards in force.

From IFRS 4 to IFRS 17

IFRS 4 is basically a transitional standard and was intended to specify financial reporting for insurance contracts issued and reinsurance treaties held by the insurance company. It was based on local insurance accounting standards and added some elements including the LAT test, but the lack of harmonization prevented real transparency and comparability for investors and analysts, which is considered a handicap for the markets.