Actuaries break down New Accounting Standards by IFRS17, Leading Insurers chime in, ET BFSI
By Siddhi Nawar
Presenting itself as a revolutionizing feat for accounting practices globally, The Worldwide Accounting Requirements Board (IASB) first launched Worldwide Monetary Reporting Requirements (IFRS) in June 2003, which changed the Worldwide Accounting Requirements (IAS) in 2001. The IFRS 17 for Insurance coverage Contracts- the rule ebook on accounting insurance coverage contracts was delivered to life in Could 2017, earlier than it turned efficient on January 1, 2023.
As for its Indian equal, The Indian Chartered Accountants Institute of India (ICAI) issued their draft of this customary below Ind AS 117, often known as Indian Accounting Requirements, in 2018. Whereas its buzz was felt strongly across the Indian Insurance sector for fairly a while, the Ministry of Company Affairs issued Ind AS 117 for Insurance coverage Contracts on August 12, 2024.
Pushing for its well timed implementation, the Insurance coverage Regulatory and Improvement Authority of India (IRDAI) initially set 2025 because the deadline for compliance by Insurance coverage firms, earlier than extending it to 2027, offering insurers with further time for implementation.
Constructing on this context, ETBFSI engaged with actuaries and CFOs from main insurers in a Spherical Desk dialogue, sponsored by SAP Fioneer, to discover the trade’s perspective. Right here’s what the specialists needed to say.
Transitioning to IndAS 117
For almost all of Insurers, the journey of IFRS 17 transitioning started greater than a 12 months in the past led by Actuaries and the Workplace of Finance. A number of actuaries spoke on the advantages of the brand new requirements, the modifications they’d result in within the firm’s operations.
Bhavna Verma, Appointed Actuary at IndiaFirst Life Insurance coverage, shared key insights into their IFRS 17 transition journey. She emphasised the significance of choosing the proper know-how associate and defining a strategic implementation method.
Verma additionally highlighted the data hole between actuaries and firm administration, which the brand new requirements intention to bridge. Advocating for the essential position of accounting and actuaries, she harassed their significance in shaping the corporate’s monetary future.
Accounting is actuality. Whereas some argue that numbers don’t outline a enterprise, I imagine they do.Bhavna Verma, Appointed Actuary, IndiaFirst Life Insurance coverage
Suresh Sinha, Appointed Actuary at GIC Re, emphasised how the brand new requirements would improve transparency and monetary well being within the trade.
In the meantime, Rohin Vig, CFO at Acko Normal Insurance coverage, acknowledged the challenges of the transition, stating, “It’ll take time, as not one of the workforce members are but prepared to completely grasp the nuances of IFRS.”
Ishwar Gopashetti, Appointed Actuary of Acko Life Insurance coverage revealed that with the brand new requirements, monetary statements can be damaged down extra legibly, bringing in transparency the place individuals can see the outcomes.
Numbers inform a narrative, and this customary presents a distinct narrative than earlier than.Ishwar S. Gopashetti, Appointed Actuary, Acko Life Insurance coverage Ltd.
Jitendra Attra, CFO of SBI Normal Insurance coverage reiterated its relevance by way of transparency and communication of economic accounting by a wider lens.
The P&L (Revenue & Loss sheet) ought to mirror an organization’s annual revenue, and IFRS 17 captures that excellently. This can utterly remodel finance and accounting in India.”- embedded quoteJitendra Attra, CFO, SBI Normal Insurance coverage
Including on the perceived worth of the corporate, Arundhati Ghoshal, Appointed Actuary at Credit score Entry Life Insurance coverage, emphasised the shareholder perspective, highlighting the significance of transparency for all stakeholders.
The requirements basically break down the monetary black field, particularly for shareholders and non-actuarial audiences.Arundhati Ghoshal, Appointed Actuary, Credit score Entry Life Insurance coverage
Commenting on the timeline of the transformation, Prasun Sarkar, Chief Actuarial Officer at ICICI Lombard, acknowledged, “Whereas some within the trade face delays, sure non-public gamers are advancing implementation. We’re nearly performed with our coverage decisions and have onboarded companies”.
On selecting the method taken to implement IFRS 17, Sarkar promoted the effectiveness of an in depth monetary impression evaluation for the transition.
Affect on India Inc
Whereas expressing the impression of the Ind AS 117 monetary requirements for India Inc, leaders delved into technical challenges that firms confronted whereas coping with its implementation.
Avdhesh Gupta, Appointed Actuary at Bajaj Allianz Life Insurance coverage spoke intimately about preserving granular monetary information whereas acknowledging the regulator’s prolonged timeline.
Challenges like information granularity are immense, and storing it’s a wholly totally different transition course of. Actuaries play a key position on this, and whereas we have already begun, the trade is driving the shift ahead.Avdhesh Gupta, Appointed Actuary at Bajaj Allianz Life Insurance coverage
On the intense facet of this, Gupta shared insights on its impression over the worth of the corporate.
He expressed how embedded worth and accounting have historically been separate, however IFRS 17 will convey them nearer, aligning fairness worth with IFRS-adjusted worth. The appropriate degree of disclosure will thus assist bridge the hole between monetary analysts and the trade.
Ishwar Gopashetti of Acko Life Insurance coverage vouched for the credibility of the reformed guidelines, in instances of loss.
IFRS doesn’t remedy every thing, nevertheless it offers beneficial insights into totally different elements of an organization. It addresses this by enhanced disclosure, making certain that losses are acknowledged upfront.Ishwar Gopashetti, Appointed Actuary, Acko Life Insurance coverage
On the usage of AI in easing this course of, Arundhati Ghoshal of Credit score Entry Life cited its significance in dealing with massive volumes of information.
With IFRS 17, we needed to adapt from a top-down perspective, given the massive volumes we deal with—a gorgeous side for us. AI has considerably impacted expertise monitoring, significantly in fraud detection.Arundhati Ghoshal, Appointed Actuary, Credit score Entry Life Insurance coverage
Tech Corporations on Guiding the Transition
Banking and insurance coverage software program agency, SAP Fioneer shared insights from its expertise navigating the IFRS transition, working with each Indian insurers and worldwide purchasers.
Referencing Europe, Chirag Shah, Managing Director- Asia at SAP Fioneer expressed that many massive insurers nonetheless relied on outdated accounting techniques, whereas India advantages from comparatively newer know-how.
In Europe, IFRS implementation was largely pushed by CFOs, whereas in India, actuaries play a way more lively position.
He added that from a regulatory standpoint, the implementation is probably not excellent, nevertheless it’s a step in the fitting path. Globally, main firms which have efficiently adopted IFRS have handled it as a knowledge transformation journey, reasonably than only a compliance train.
