IFRS17 and its impact on the Insurance sector

by Sumesh Krishna; Senior Partner, HLB HAMT


IFRS17, also known as the International Financial Reporting Standard 17, is a set of accounting standards developed by the International Accounting Standards Board (IASB) and related to insurance contracts. The standards originated in May 2017 but only came into force at the beginning of 2023. They represent a significant overhaul of accounting practices around insurance contracts.

Many small and medium-sized insurers have yet to fully understand the standards due to their perceived complexity. However, addressing the challenge head-on, rather than leaving it to the last minute or beyond will help companies adapt more effectively and efficiently. A lack of preparation could lead to needless urgent costs, significant anxiety, and potential compliance risks. So, what do you need to know about IFRS17, how it differs from previous standards, and how should you prepare for implementation?

What is IFRS 17?

The main objective of IFRS17 is to provide more consistent and transparent financial reporting for insurance contracts and improve comparability across different insurance companies.

What is the objective?

By establishing a single, principles-based accounting model, IFRS17 seeks to address any shortcomings associated with previous standards. Now, financial statements will be more accurate and deliver complete information about the insurance contract. The standard requires these contracts to be measured at fulfilment value to reflect the present value of future cash flows, adjusted for risk and time value. It also introduces the "contractual service margin" (CSM) concept, which recognises profits over the coverage period. With enhanced disclosure requirements, the standard enables stakeholders to better understand performance, financial position and risks associated with insurance contracts.

Who is this relevant to?

IFRS17 is relevant to a broad range of stakeholders in the insurance industry, including investors, regulators, analysts, and insurance companies. Regulators will use the standards-compliant financial reports to monitor companies, ensuring stability and integrity throughout the insurance sector. The insurance companies must adopt the standards throughout their financial reporting practices. At the same time, analysts can evaluate business performance, look closely at risk exposure, and provide recommendations to investors and stakeholders.

Is IFSR17 mandatory or voluntary?

IFRS17 is now mandatory for insurance companies operating within jurisdictions, like the UK, where the standard is now law. Those companies will need to comply with the standards through their financial reporting practices. Until now, companies that comply may have done so voluntarily, based on any transition arrangement established by the national authority.

Where will IFSR17 be applied?

IFRS17 applies to all insurance contracts (including reinsurance contracts) issued by insurance companies. A broad scope covers various types of contracts, including property and casualty, life insurance, and health insurance.

The standard applies to new and existing insurance contracts, so insurance companies must implement changes to older accounting policies, processes or systems to comply. Through enhanced transparency and consistency in financial reporting, IFRS17 facilitates regulatory oversight and promotes investor confidence. Overall, it seeks to contribute to the stability and integrity of the insurance industry.


IFRS17 marks a significant change in how insurance contracts are accounted for and reported in relation to the previous standard, IFRS4.

One of the most significant differences is in the measurement and recognition of insurance contracts. Under the old system, insurers had a certain amount of leeway when selecting accounting methods, which may have led to inconsistency or limited comparability across financial statements. Due to this lack of uniformity, investors, analysts and regulators could find it challenging to assess and compare financial performance or risk profiles.

However, IFRS17 establishes one principles-based accounting model to measure contracts at fulfilment value. This value reflects the present value of future cash flows, which adjusts for risk and the time value of money. Through a consistent approach to measurement, IFRS17 enhances accuracy and transparency across financial reporting. It gives stakeholders a clear understanding of any insurer's financial position and performance.

What are the key impacts of this new standard?

In addition to the new financial reporting model (where insurance contracts measure at fulfilment value), IFRS17 introduces the concept of contractual service margins (CSM). This represents the unearned profit on an insurance contract and is amortised over the coverage period to reflect the transfer of services as the insurer fulfils any obligations.

There are also enhanced disclosure requirements that require companies to provide confidential contract information. This includes details related to risk exposures, assumptions, sensitivity analyses and the impact of changes in estimates or discount rates.

Actuarial modelling is also crucial in determining key impacts or assumptions used in calculating contract liabilities. So, companies may need to develop or refine actuarial models to ensure that they accurately reflect these contracts' underlying risks and characteristics.

How to prepare for IFRS17

To help prepare for IFRS17, companies should adopt a systematic and comprehensive approach following several key steps:


Companies should thoroughly understand the implications and requirements of the standard and may need to conduct in-depth training sessions or workshops for teams.

Assessing impact

Each company should assess the impact of IFRS17 on financial statements, processes, systems or controls. They may need to conduct detailed impact assessments to pinpoint the areas that need changes or enhancements.

Collecting and analysing data

Companies should assess the availability, detail and quality of any data required for calculating key metrics.

Enhancing systems and processes

Some companies must enhance their accounting systems and processes to comply with requirements. They may need to upgrade existing systems, bring in new software solutions or develop custom applications.

Developing actuarial models

As actuarial models play a crucial role in determining key inputs and assumptions, companies may need to develop or refine these models. This will help them accurately reflect any underlying risks and characteristics through insurance contracts.

How HLB can help

Insurers should evaluate, understand and apply the new standard to all insurance contracts and reporting, but this could take time and energy. For many, it will be a substantial transformation programme, and it may be difficult to know where to start. However, the team at HLB Global includes a group of advisers who are fully up to speed on the new IFRS rules and who can help your company understand the key complexities involved.

HLB works with SMEs and large companies across multiple sectors. Learn more about our IFRS services, and don't hesitate to contact us for more assistance.