Middle East: Accounting changes keep GCC insurers on their toes
Source: Middle East Insurance Review | Aug 2023
The adoption of IFRS17 and IFRS9 in the GCC region represents a significant change in accounting practices for some insurers and has fundamentally changed the way that they report their financial results, said S&P Global Ratings.
“While we do not expect the accounting changes themselves to trigger rating actions, their secondary effects could,” said S&P credit analyst Emir Mujkic.
“This could be the case if, for example, insurers adjust their capital management or risk appetite because of changes to their key performance indicators,” he said.
The new accounting standards will improve transparency and make it easier to identify and compare how insurers generate profits and manage risk. However, they will also require insurers to update their internal processes and IT systems, which will take time and result in additional costs and other operational challenges. In S&P’s view, the adoption of IFRS17 and IFRS9 places additional pressure on external parties such as auditors, external actuaries and regulators.
Mr Mujkic said, “Across the GCC region, we still see substantial differences in insurers’ level of preparedness for the new accounting standards. Consequently, approaches to reporting the first financials under IFRS17 and IFRS9 diverge across the region.”
Insurance regulations in GCC countries continue to evolve, with regulators renewing their focus on solvency capital, corporate governance, risk management and anti-money laundering to enhance insurers’ internal controls. Tougher regulation and intense competition are driving consolidation in the industry, particularly as some small and midsize insurers struggle to achieve minimum solvency capital ratios and meet other regulatory demands. M