International rating agency Fitch Ratings has said that the implementation of IFRS 17 has been a significant step towards increasing transparency and comparability in insurers’ financial statements.

In a new report on its website, Fitch stated that although IFRS 17, effective since January 1, 2023, has not achieved full comparability, the financial statements of insurers are becoming more aligned, with further improvements expected in upcoming reporting cycles.

The IFRS 17 standard is effective for annual reporting periods beginning on or after January 1, 2023 and has been implemented by insurance companies in Nigeria.

According to Deloitte, IFRS 17 established the principles for the recognition, measurement, presentation, and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity’s financial position, financial performance, and cash flows.

“Fitch finds that, while IFRS 17 has not fundamentally changed its view on insurers’ underlying profitability, the introduction of the contractual service margin 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,” part of the report read.

A number of insurance companies in Nigeria had experienced delays in the filing of their 2023 financial reports with the Nigerian Exchange Limited due to the implementation of the IFRS 17 standard.