Malaysia: IFRS 17 delay a boost for takaful sector
Source: Middle East Insurance Review | Jun 2020
The postponement of IFRS 17 is a relief for Malaysia’s 11 takaful operators in the market considering that the basis for implementation for takaful has yet to be fully ironed out.
“There are still ongoing discussion, at an industry level, on the appropriate methodology to implement IFRS 17 for takaful companies in Malaysia. This means that many takaful operators are currently behind on the original timeline so takaful operators, in particular, will feel that the new deadline gives them a more realistic chance of implementation,” said Milliman principal and consulting actuary Farzana Ismail.
There are some aspects which remain unclear in modelling IFRS 17 for insurance contracts issued by mutual entities, which impacts takaful operators and insurers with participating business, she said.
“Several multinationals have developed systems and models for IFRS 17, but these models may have limitations for the purpose of takaful. For example, results generated by the models may be on a total company basis only, as applicable for insurers. If there is a requirement for takaful operators to report figures on a fund basis (ie, columnar basis), companies will need to modify their internal systems and models to meet this additional requirement,” said Ms Farzana.
It is understood that guidance on the application of IFRS 17 for takaful operators will be issued soon by the Malaysian Accounting Standards Board (MASB).
Malaysia’s insurance sector comprises 55 licensed (re)insurers and (re)takaful operators. M