IFRS 17 results not yet fully comparable, Fitch argues

Written by Adam Cadle

24/01/2023

Comparing insurers’ IFRS 17 results will be difficult initially due to differences between companies’ approaches under the accounting standard, which took effect for most insurers on 1 January 2023, Fitch Ratings has said.

Some companies incorporate an illiquidity premium into their discount rates based on their own asset mix while others use an illiquidity premium based on a standard investment portfolio. As a result, two companies with similar portfolios could report very different contractual service margins (CSMs), Fitch said.

The lack of a standard definition under IFRS 17 for certain key metrics also hinders comparisons, it added. For example, the market has not settled on a clear definition for the ‘operating result’ or for the non-life combined ratio.

Fitch said it expects IFRS 17 results to become more (but not fully) comparable over the next two years, with insurers, analysts and investors gradually developing enough confidence in the new accounting standard to use it as a basis for decision-making.

“In the meantime, we do not expect IFRS 17 to significantly affect insurers’ business models – or their credit ratings.”

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