IFRS 17 hailed as a major step toward improving transparency in insurance reporting

The adoption of the International Financial Reporting Standard 17 (IFRS 17) has been hailed as a major step toward improving transparency in insurance reporting. However, its implementation has posed challenges for insurance companies in Nigeria, leading to delays in filing financial statements.

Fitch Ratings, in a new report, acknowledged that while IFRS 17 has not yet achieved full comparability, it has enhanced the consistency of insurers’ financial disclosures. The standard, which took effect on January 1, 2023, replaces IFRS 4 and introduces a uniform approach to recognizing, measuring, presenting, and disclosing insurance contracts.

According to Deloitte, IFRS 17 aims to provide financial statement users with more relevant and reliable information about insurers’ financial health. A key aspect of the standard is the Contractual Service Margin (CSM), which reflects future unearned profits and allows for a clearer assessment of profitability and risks. Fitch noted that this has improved the predictability of insurers’ financial performance.

“Despite these insights, IFRS 17 has had limited influence on insurers’ strategic plans and capital management policies of European and Canadian insurers, which remain driven by regulatory solvency metrics. However, some insurers in Asia-Pacific regions, including South Korea and Taiwan, are reconsidering their product offerings due to IFRS 17.”

In Nigeria, the transition to IFRS 17 has not been entirely smooth. Several insurance companies faced difficulties in adapting to the new reporting framework, leading to delays in submitting their 2023 financial reports to the Nigerian Exchange Limited. Analysts suggest that while IFRS 17 promises long-term benefits, insurers in the country may require more time and resources to fully integrate the new standard into their operations.