Insurance companies in the GCC region have been working towards alignment with IFRS17 for over three years now, and the process to date has largely been organised, according to the latest commentary published jointly by the UAE market research firm Insurance Monitor and LUX Actuaries & Consultants.
The report said that the process towards adopting IFRS17 is controlled by local regulators that initially set out a common broad approach. The pace of execution, however, has been varied in terms of priorities, timelines, submissions and the level of detail, process- and system-related aspects, user-testing, dry runs and the level of stakeholder involvement, said the report.
The Saudi Central Bank (SAMA) is at the forefront of the process and well on its way to plotting an early learning curve for the Saudi insurance sector with the second dry run due by 31 May 2022 for the financial year ended 31 December 2021. In parallel, most insurers have commenced system integrations and other process-related changes. In addition, the regulator has outlined a detailed scope of work for external auditors to ensure a seamless and well-tested transition.
Likewise, the process appears to be gathering momentum in Bahrain with the first dry run due by 14 August 2022 for the six months ending 30 June 2022.
In contrast, the Central Bank of the UAE has suggested a dual reporting framework. While IFRS17 will be adopted for general-purpose accounting with effect from 1 January 2023, regulatory reporting (for solvency) will continue via the current eForms and gradually align with IFRS17 in due course.
Apart from the third (more comprehensive) Financial Impact Assessment (FIA) due by 31 March 2022 for the financial year ended 31 December 2020 and quarterly progress updates, dry runs have not been mandated and insurers are generally navigating the implementation process with the support of consultants.
Elsewhere, further instructions are awaited from the Capital Market Authority in Oman, while progress in Kuwait and Qatar remains largely market driven.
With just three quarters left to the ‘go live’ date of 1 January 2023, the transition to IFRS17 is now a pressing priority for insurers, said the report.
The report is presented in two parts, delving into two actuarial assumptions when transitioning to IFRS17. These assumptions and the choice of methodologies thereof are decisions for insurers that influence how profit from insurance contracts emerges and is reported over time. M