With just over a year till the IFRS 17 effective date of 1 January 2023, most insurers in the GCC region are yet to initiate implementation of design plans. The process of alignment with IFRS 17 in the region has been phased by the local regulators with the Saudi Central Bank in the forefront followed closely by the Central Bank of the UAE. Hard deadlines have been established in Saudi Arabia for three dry-runs due on 30 November 2021, 31 May 2022 and 29 September 2022 for the Y/E 2020, Y/E 2021 and H1 2022 respectively.

Conversely, momentum appears to have slowed down in Oman with less obvious reinforcement of previously established due dates for parallel-runs while progress in Kuwait remains generally market-driven without significant regulatory involvement. For UAE and QFCRA registered insurers, there is focus on the Financial Impact Assessment (‘FIA’) stage requiring submissions for the Y/E 2020 and Y/E 2021. This highly theoretical approach uses limited data and is largely educational compared to the dry-run approach that uncovers and tackles transition-related concerns and considerations. The dry-run approach is more practical and calls for the early involvement of external auditors making for a more seamless and well-tested transition.

TRANSITIONING TO IFRS 17: Some key decisions for insurers

In this two-part series, in partnership with Insurance Monitor, we delve into two key actuarial assumptions when transitioning to IFRS 17. These assumptions and the choice of methodologies thereof are key decisions for insurers that influence how profit from insurance contracts emerges and is reported over time:
the computation of Risk Adjustment: concept, measurement approaches and diversification discussed in Part 1; and
the selection of an appropriate Discount Rate to be discussed in Part 2.

Part 1, available on the Insurance Monitor website, covers the following:

• the concept and guiding principles for insurers when computing Risk Adjustment;
• the various measurement approaches thereof, and key considerations for insurers when selecting a suitable methodology;
• the concept and allowance for diversification benefits in the computation of risk adjustment;
• the common risk adjustment practices by insurers in the GCC region;
• further considerations when establishing the risk adjustment that should dovetail with each insurer’s risk appetite while feasibly meeting the requirements of IFRS 17.

Click here to download the report for free.