IFRS-17: Experiences From Roll Out

By Arindam Mookherjee (Contractor), India Lead, Society of Actuaries

June 2025

In 2025, the insurance industry is poised for a major transformation with the adoption of International Financial Reporting Standard (IFRS) 17. This new accounting standard will radically change how insurance contracts are recognized, measured and reported, requiring insurers to overhaul their financial systems and processes.

Fundamentally, IFRS 17 is aimed to provide a more consistent, transparent and comparable framework for insurance contracts, which will be achieved with the introduction of a standardized approach to the recognition and measurement of insurance liabilities and revenue. Under IFRS 17, insurance companies will need to account for insurance contracts based on the present value of future cash flows, including the cost of fulfilling the contract, expected profits and risks associated with the contract, which is a more accurate reflection of an insurer’s financial position, making it easier for stakeholders to assess the performance of the business.

The fundamental changes are on revenue recognition and profitability analysis. Currently, premiums are recognised as revenue over the life of a contract. Under IFRS 17, however, insurers will recognize revenue based on the expected cashflows from the contract, adjusting for changes in assumptions over time. On the profit front, a concept called contractual service margin (CSM) has been introduced, which represents the expected profit from an insurance contract.

To effectively implement this, insurers are expected to manage data across multiple systems, including actuarial models, financial systems and risk management platforms. The integration of these systems is crucial to ensuring compliance with IFRS 17. Actuarial teams will need to work closely with finance and IT departments to develop new processes for data collection, analysis and reporting. IT systems will need to be upgraded or replaced to accommodate the complex data requirements of IFRS 17. Moreover, IFRS 17 requires significant changes to internal controls and reporting processes where insurers have to ensure that their financial reporting systems can handle the increased complexity of revenue recognition and the measurement of insurance liabilities.

According to a report by Fitch, although IFRS 17, effective since 1 January 2023, has not achieved full comparability, the financial statements of insurers are becoming more aligned with further improvements expected in upcoming reporting cycles. It further concludes that, while IFRS 17 has not fundamentally changed the interpretations of insurers’ underlying profitability, the introduction of the CSM has significantly enhanced the predictability of insurers’ profitability. The CSM, reflecting future unearned profit, is recognised over time, allowing clearer identification of growth opportunities and vulnerabilities.

Despite these insights, IFRS 17 has had limited influence on insurers’ strategic plans and capital management policies of European and Canadian insurers, which remain driven by regulatory solvency metrics. However, some insurers in Asia-Pacific regions, including South Korea and Taiwan, are reconsidering their product offerings due to IFRS 17.

IFRS 17, the global insurance accounting standard, took effect in 2023, with India aligning through Ind AS 117, issued in August 2024. While the initial compliance deadline was 2025, IRDAI has extended it to 2027, giving insurers more time to adapt.

This article is also available on an SOA blog hosted by CIM GLOBAL INDIA