Insurance corporate reporting IFRS 17 - business as usual?

In our article series "What’s next in insurance reporting five priorities for 2027 and beyond", we will explore five corporate reporting issues that will define insurers’ corporate reporting in the next few years, including artificial intelligence (‘AI’), cyber risk, IFRS 17, IFRS 18, and climate change. We highlight what insurers need to monitor, where significant judgement will be required, and how organisations can stay ahead of evolving regulatory and stakeholder demands. This first article will focus on IFRS 17.

IFRS 17 Insurance contracts as business as usual?

As IFRS 17 enters its third year, insurers have largely overcome implementation challenges. The focus now shifts to streamlining KPIs, enhancing reporting efficiency, and ensuring the standard delivers on its objectives of comparability, profitability insights, and transparency.

That said, implementation challenges have not disappeared entirely, and the forthcoming Post-Implementation Review (PIR) will play a key role in addressing ongoing concerns about accounting mismatches and volatility in the insurance industry.

1. KPI streamlining is becoming increasingly important

Although IFRS 17 is a financial reporting standard, its implementation introduced new performance metrics—such as CSM-linked measures—and impacted the calculation of existing ones, including Adjusted Operating Profit (AOP) for life insurers and the Combined Ratio for non-life insurers.

UK non-life insurers align closely on KPI usage and calculation, particularly for the Combined Ratio. They can unlock additional value by adopting IFRS 17-linked KPIs instead of relying on pre-IFRS 17 metrics like Gross Written Premium as their primary growth measure. Further disaggregating the Combined Ratio into expense and claims ratios will provide more meaningful insights into operational efficiency and supports targeted performance improvement strategies.

In contrast, the life insurance market shows greater diversity in IFRS 17-linked KPIs. Common themes include CSM-based metrics and AOP, although insurers apply adjustments differently. Full alignment across the market remains unlikely; however, some convergence may emerge as AOP falls within the scope of IFRS 18 as a management performance measure. As IFRS 18 requires insurers to disclose management performance measures in a separate note, reconciliations between AOP and IFRS operating profit will become more prominent, driving greater consistency in reconciliation adjustments.

The process of KPIs streamlining broadly includes the following steps:

• Reflect and align with market practice. Review insights from the first two years of IFRS 17 reporting and benchmark against peers. Reassess both external and internal performance metrics, using KPI trends to inform operational and profitability strategies. As analysts and investors value consistency aligning KPIs with market helps improve comparability and credibility.
• Recalibrate for future trends. Consider future economic trends and accounting implications that may influence KPIs. Lower profitability margins across the insurance sector, combined with the ongoing impact of transition contractual service margin approximations, could reshape future performance metrics. From an accounting perspective, IFRS 18 will increase the prominence of management performance measures (such as AOP) in financial statements and require more detailed reconciliations of KPIs, including tax and non-controlling interest effects.
• Leverage IFRS 17 data for efficiency. With IFRS 18 introducing greater disclosure requirements, it is essential to drive efficiency by fully leveraging data used for performance metrics. Alignment should extend across the organisation, from updating remuneration frameworks that rely on legacy KPIs to implementing future IT system changes that support reconciliations. Explore automation and AI to enhance KPI reporting and reduce manual effort.

2. Implementation challenges persist as the Post-Implementation Review (PIR) approaches

Despite IFRS 17 being embedded within insurers’ reporting processes, a number of technical challenges remain. Notably, only a limited number of submissions have been made to the International Financial Reporting Interpretations Committee (IFRIC) since IFRS 17 adoption. This may indicate that insurers are finding practical solutions to existing issues, or alternatively that some challenges fall outside IFRIC’s remit and should be appropriately addressed through the PIR.

Many of these challenges are not new and were widely debated during the standard-setting process at both the International Accounting Standards Board (IASB) and the UK Endorsement Board (UKEB). Non-life insurers continue to face issues in relation to business combinations, particularly where contracts acquired during their settlement period led to extended coverage periods that captured the determination of the ultimate cost of claims occurred before the acquisition date. This requirement can create operational complexity, especially where contracts would otherwise have been measured as incurred claims.

As IFRS 17 impacts life insurers most significantly, they are expected to raise more concerns than their non-life counterparts during the PIR. For certain topics, like annual cohorts and locked-in discount rates for the CSM, significant changes are considered unlikely.

One area expected to attract further attention is accounting mismatches. In November 2025, IFRS Foundation staff highlighted volatility mismatches as a widespread issue and a key focus for future PIR. However, accounting mismatches in IFRS 17 do not constitute a new issue and were widely debated during standard setting. Key areas previously raised include:

• The use of locked‑in discount rates in general model to determine the contractual service margin versus current assumptions for fulfilment cash flows.
• The inability to apply the variable fee approach (‘VFA’) to reinsurance contracts issued, even when the underlying contracts would qualify for variable fee accounting.
• The requirement to apply one accounting model throughout the coverage period, even when the contract’s nature evolves.
• Limitations in the risk mitigation option, including its application only to VFA contracts and its absence in the general model.

Across these examples, the common theme is a lack of consistency in aspects of insurance liability measurement. The PIR will consider whether such mismatches reflect genuine economic volatility or are artefacts of the accounting model. Where mismatches are purely accounting-driven, targeted adjustments may be considered by the IASB, whereas economically driven mismatches are less likely to be addressed.

A key question remains: has IFRS 17 achieved its original objectives of improving comparability, providing clearer profitability insights and enhancing transparency? Better practice reporting will require open and continued discussion between insurers and standard-setters. As our IFRS 17 benchmarking review shows, progress in these areas will depend not only on the standard itself, but also on the quality of reporting practices adopted by insurers.

What can insurers do now to achieve positive PIR results?

• Prioritize key issues: Focus on the most significant challenges during the IFRS 17 post-implementation review. Report widespread issues to the IASB and UK-specific concerns to the UKEB, as standard-setters will prioritise matters impacting a broader audience.
• Engage in industry dialogue: Continue active participation in industry forums to develop a unified position and commentary for standard-setters. A coordinated approach increases the likelihood of meaningful changes.
• Differentiate mismatches: Clearly distinguish economic mismatches from accounting mismatches. While standard-setters may address accounting mismatches, economic mismatches are best explained through enhanced narrative disclosures in financial statements.

3. IFRS 17 adoption under UK GAAP is inevitable

In the UK, IFRS 17 has been adopted by listed companies and some insurers that prepare group-reporting where IFRS 17 is mandatory. Other insurers switched to applying the UK GAAP to avoid IFRS 17 implementation requirements.

As of right now, there have been no formal announcements regarding the timeline for adopting IFRS 17 within UK GAAP. However, it is generally expected that formal consideration will only take place once the IFRS 17 PIR has been completed by the UKEB. The UKEB has recently announced that it will publish its PIR report no later than 1 January 2028. In addition to the PIR, further issues would need to be resolved before IFRS 17 could be adopted into UK GAAP, including amendments to the Companies Act. At present, UK GAAP insurers are required to comply with Schedule 3, and significant legislative work would be required to enable change.

Although it is too early to forecast how IFRS 17 will be implemented in the UK GAAP, it is now clear that the IFRS 17 avoiding strategy, most of the UK insurance market has adopted, was a temporary solution.

What can insurers do now to make the UK GAAP transition to IFRS 17 smoother once (and if) it’s out there?

• Carry out UK GAAP vs IFRS 17 gap analysis: Begin assessing the key gaps between UK GAAP and IFRS 17, using past FRC adoptions of IFRS 16 and IFRS 15 as a guide to likely continuity in core measurement principles. Early work will allow for quick adjustments once any UK‑specific simplifications are finalised by the FRC.
• Influence IFRS 17 post-implementation review: Monitor industry issues and emerging challenges and contribute to the review process to ease the eventual transition from UK GAAP.
• Leverage lessons learned: Apply insights from the 2023 IFRS 17 transition experiences of other UK companies to avoid common pitfalls.
• Plan for costs: Incorporate potential IFRS 17 implementation expenses into long-term cash flow forecasts to mitigate financial surprises.
• Educate leadership: Ensure management and the Board understand IFRS 17’s core principles and its impact on financial statements.