The impact of IFRS 17 on non-life insurance companies in Malta

Abstract

Purpose: The objective of this study is to identify the anticipated impact of IFRS 17 on the financial reporting practices, Information Technology (IT) systems and actuarial input of local general insurers.

Design: Semi-structured interviews were held with Insurance Companies, Insurance managers, auditors and actuaries to attain the research objectives. A range selection of candidates was adopted to obtain a diversified professional opinion.

Findings: The findings identified notable challenges insurers are currently facing due to implementation. It emerged that more training is required to the professions and affected stakeholders due to the new insurance jargon used. The presumed changes to the financial statements of insurers together with the anticipated volatility were also outlined. Furthermore, it portrayed hefty costs which will be borne by insurers due to the necessary improvements to the existing IT systems. Also, it highlighted the stringent deadlines encountered while trying to juggle the IFRS 17 implementation. The changes and added burdens to the actuarial role were also depicted.

Conclusions: The study concluded that insurers have to improve their systems for better data quality and storage; also due to the increased granularity under IFRS 17. Hence it is suggested to invest in subledgers and data warehouses. More training has to be provided to mitigate the knowledge gap between accountants and actuaries. Surely there is still room for improvement, and now that the implementation date has been deferred to 2023 insurers should take this as an opportunity to fine tune their existing practices.

Value: The study’s intention is to provide recommendations about enrichments in compliance with IFRS 17. It is believed that taking the necessary measures will reap long-term benefits for insurers, particularly from a data perspective. A particular recommendation was to exclude captives from detailed reporting when compared to other large insurers. Fundamentally, the aim was to increase awareness regarding the importance for companies to start acting now to ensure a smooth transition.