The new global accounting reporting standard for insurance contracts are set to have large-scale financial impact
There could be considerable cost in implementing the new IFRS 17 accounting reporting standard, and these costs could be in line with those seen during the Solvency II (S2) implementation phase, according to reports from Fitch Ratings.
Speaking at today’s FitchRatings’ annual Insurance Roadshow, FitchRatings managing director Harish Gohil stated that while there were significant differencies between the European S2 and the global IFRS 17, one area where they would likely be similar was their cost to insurance firms.
He said: “IFRS 17 is not just S2 with a few tweaks, and IFRS 17 project costs may not be far off what we saw for S2 project costs, which as we know were huge.”
The final standard was published in May 2017 and will be in effect 1 Jan 2021. So, as 12 months of reporting are required for this launch date, there are only two years for implementation.
With that said, Gohil also affirmed that Fitch did not foresee IFRS 17 having an initial impact on the ratings of insurance firms.
He added: “We don’t think IFRS 17 will have an immediate impact on insurance ratings from day one – essentially because the economic substance is not changed by this lens. Of course, new disclosures could reveal issues that we were not aware of that could impact ratings, but we don’t see this happening on a great scale.”