Report on the implementation of IFRS 17 - Insurance contracts

IFRS 17 – Insurance contracts entered into force on 1 January 2023. The new standard aims to increase transparency and to reduce differences in the accounting for insurance contracts and it replaces IFRS 4 (interim standard).

This report analyzes how insurance undertakings in the EU implemented the new insurance accounting standard IFRS 17 as well as the synergies and differences in the calculation of insurance liabilities with the Solvency II framework.

The move to IFRS 17 led to significant changes in the value of insurance liabilities given the use of different valuation approaches, the shift from implicit prudency to explicit risk adjustment and the introduction of a contractual service margin (CSM) in IFRS 17.

On the other hand, although Solvency II and IFRS 17 serve different purposes – the former aims to protect policyholders while the latter focuses on providing reliable information  to the users’ of undertakings’ financial statements – they share significant similarities allowing for material synergies. These include, for example, employing a market-consistent valuation approach, probability-weighted estimates of future cashflows, and discount rates to determine the present value of cashflows expected from the insurance liabilities.