IFRS 17 is a new global accounting standard for insurance contracts that aims to regulate financial reporting practices in the insurance industry. Its implementation is of great importance in Dubai, it helps to escalate transparency and accountability in the insurance sector. By applying IFRS 17, insurers are enabled to offer investors and other stakeholders more precise and comparable financial information. Top audit firms in Dubai assist corporations to seamlessly implement IFRS 17 and to stay compliant with relevant regulations and standards.
Key Considerations for Implementing IFRS 17 in Dubai
Implementing IFRS 17 is an important undertaking for insurance companies in Dubai.
Below are some key considerations for implementing IFRS 17;
Impact on Financial Statements
IFRS 17 brings major changes to the financial statements of insurance firms in Dubai. The new standard requires a different tactic for the recognition and measurement of insurance contracts, which influences the way insurers report their financial performance. Companies need to re-evaluate their financial reporting processes and ensure that their business statements comply with the new standards.
Data and Systems Requirements
The implementation of IFRS 17 requires insurers to gather and maintain a large amount of data. This needs significant changes to existing systems and procedures. Companies are compelled to ensure that their systems are proficient in capturing essential data accurately and promptly. Also, they will need to establish the necessary controls to ensure the integrity of the data.
Actuarial Considerations
IFRS 17 presents new actuarial concepts and calculations that insurers will need to know and apply. The calculation of the contractual service margin (CSM) is a main element of the new standard. As such, insurers will need to ensure they have the required actuarial proficiency to implement IFRS 17 efficiently. This will require the development of new processes and procedures for calculating the CSM.
Read more: Opportunities with IFRS 16 that Audit Services in UAE should know
Contractual Service Margin (CSM) Calculations
The calculation of the CSM is essential to IFRS 17 and contains a complex set of calculations to determine the effectiveness of insurance contracts. Insurers will need to improve new processes and procedures to calculate the CSM. They need to ensure that they have the essential data and actuarial expertise to do so. Firms will need to assess the influence of CSM calculations on their financial statements, which may require alterations to existing accounting policies.
Disclosures and Reporting Requirements
IFRS 17 presents new disclosure and reporting requirements that will require major changes to existing reporting processes. Insurers will need to deliver detailed information on the profitability of insurance contracts, which will need them to collect and maintain more detailed data than they have in the past. Companies will need to establish the essential processes and procedures to ensure the accuracy and extensiveness of their reporting, including the development of new financial reports.
What are the main challenges in Implementing IFRS 17 in Dubai?
Implementing IFRS 17 poses several challenges for insurance companies in Dubai. Below are some major challenges you may face in implementing IFRS 17 in Dubai;
Complexity of Implementing
Implementing IFRS 17 is difficult and requires important changes to the recognition and measurement of insurance contracts. Companies will need to develop new systems, procedures, and controls to comply with the standard's requirements. The complexity of the new standard may be most challenging for smaller companies that lack the essential resources and expertise to implement IFRS 17 successfully.
Resource Constraints
Implementing IFRS 17 will need major investments in new systems, processes, and controls, as well as the development of new actuarial expertise. However, many companies in Dubai may face resource constraints that make it difficult to implement the standard successfully. This may include a lack of subsidy, staff with the necessary skills and proficiency, and competing resource demands.
Influence on Existing Contracts and Pricing Tactics
The implementation of IFRS 17 may have a major influence on existing contracts and pricing strategies for insurance companies in Dubai. Companies will need to re-evaluate their pricing tactics to ensure they comply with the new standard, potentially resulting in changes to existing contracts.
Influence on Insurer's Business Models
The implementation of IFRS 17 has had a substantial influence on the business models of insurance companies in Dubai. Companies will need to carefully assess the potential effect of the new standard on their business models. The implementation of IFRS 17 may also result in augmented competition and alliance within the insurance industry in Dubai.
Seek the expert services of top audit firms in the UAE
The implementation of IFRS 17 in Dubai presents numerous challenges for insurance companies. However, with careful planning and the right support, companies can effectively comply with the new standard. AFD is one of the top audit firms in Dubai and approved auditors in Dubai. The expert team can provide the essential guidance and expertise to smooth the transition to IFRS 17. Thus, contact us today and we shall be glad to assist you.
Umapathy Anuruthan, is a Senior Auditor at the firm, holds a Business Management Degree and carries with him an experience of 6+ Years, having worked in two of the Big 4 audit firms. He has a ‘hands-on’ understanding of external audits and financial reporting and is well-known for his approach to ensuring the highest quality and accuracy in audits for clients of numerous industries.
