Insurance corporate reporting IFRS 18 – preparing for adoption

This article is the second instalment in our "What’s next in insurance reporting five priorities for 2027 and beyond" series, which explores the corporate reporting developments that industry participants need to keep on their radar, including artificial intelligence (‘AI’), cyber risk, IFRS 17, IFRS 18, and climate change. Here, we focus on the implementation of IFRS 18, Presentation and Disclosure in Financial Statements, and the key challenges that have already sparked significant discussion across the sector.

What do insurers need to know about IFRS 18?

Insurers reporting under IFRS will apply IFRS 18 Presentation and Disclosure in Financial Statements starting from 1 January 2027. After navigating significant changes under IFRS 17 Insurance Contracts, most insurers do not expect IFRS 18 to have a major impact on the industry. However, several insurance-specific issues require attention and are highlighted in this publication.

Associates and joint ventures classification

IFRS 18 introduces a structured Income Statement, categorising income and expenses into Operating, Investing, and Financing activities.

When insurers apply the equity method to account for associates and joint ventures, applying IFRS 18 requirements they must include related income and expenses in the Investing category, even if these investments form part of their main business activity. Meanwhile, other investments from main business activity will appear in the Operating category, creating a potential mismatch.

To address this issue, the International Accounting Standard Board (‘the IASB’) permitted the election of the fair value option under IAS 28 at the transition to IFRS 18. Applying this option would allow insurers to include income and expenses from associates and joint ventures within the operating category, as investing forms a core part of insurers’ main business activity. However, the current scope of IAS 28’s fair value option is narrowly defined, referring only to insurers in the context of underlying items for contracts measured under the variable fee approach. While the standard also mentions “similar entities,” it provides no clear guidance on whether this includes all insurers irrespectively of the types of insurance contracts they write.

In December 2025, the IASB proposed to consider extending the fair value option in IAS 28 ‘Investments in Associates and Joint Ventures’ and clarify that “similar entities” include those whose specified main business activity is investing in assets. This amendment would broaden the ‘fair value’ option scope to cover all insurers that invest in associates or joint ventures as part of their main business activity as business operations. The Exposure Draft Amendments to the Fair Value Option (IAS 28) is open for comments till the 20 of April 2026.

Expenses disclosed by nature

IFRS 17 requires insurers to present insurance service expenses by function. IFRS 18 (paragraph 83) requires disclosure of certain expenses by nature, such as depreciation, amortisation, employee benefits, and impairment losses. While insurers already provide some information on these expenses under existing IAS 1 requirements, IFRS 18 enhances this by requiring a more granular breakdown. Specifically, applying the requirement of IFRS 18 para 83 insurers would mean to disaggregate these expenses in the notes, showing their allocation between insurance service expenses and other operating expenses outside of insurance service result. This change has sparked debate in the market about whether IFRS 18 will lead to additional “by nature” disclosures beyond current practice.

In November 2025, the International Financial Reporting Interpretations Committee (‘the IFRIC’) tentatively confirmed that the requirements of paragraph 83 will apply to insurance service expenses. Notably, the submission mentioned amortisation of assets for insurance acquisition cash flows, and the IFRIC response suggest there are no expenses that are excluded from the requirements of paragraph 83. Therefore, insurers will need to analyse what types of insurance service expenses will potentially require additional disclosure ‘by nature’. Practically, this means insurers must enhance ledger granularity to meet reporting requirements. The IFRIC Tentative Agenda decision Scope of the Requirement to Disclose Expenses by Nature (IFRS 18) is expected to be finalised in March 2026.

Management Performance Measures (MPMs)

IFRS 18 introduces a structured approach to performance reporting by requiring entities to disclose Management Performance Measures (MPMs) in a separate note within financial statements. Each MPM must be clearly defined and reconciled to the nearest subtotal or total in the profit or loss statement.

For insurers, Adjusted Operating Profit (AOP) will likely qualify as an MPM. Insurers’ operating profit will inevitably incorporate accounting mismatches and volatility in financial instruments valuation that will likely be stripped out of AOP. Insurers will need to present these figures within MPM reconciliation (AOP to Operating Profit), showing separately non-controlling interest and tax effect. Although many insurers already present the reconciliation of AOP, following this specific IFRS 18 requirement will cause additional operation effort from the finance team.

What should insurers do to prepare for IFRS 18 adoption?

Although IFRS 18 does not introduce material changes to insurers’ reporting, it does require adjustments to primary statements and additional disclosures within financial statements. This is what insurers should start doing in 2026 and going forward to prepare for IFRS 18 adoption for the periods ending 31 December 2027:

• Classify existing income and expenses under IFRS 18 categories – investing, financing and operating.
• Identify areas requiring extra effort, for example changes for associates/joint ventures or income and expenses allocation methodology updates.
• Analyse existing performance metrics to determine if they meet the MPM definition. Market expectations suggest combined ratios for non-life insurers and CSM-linked metrics for life insurers will likely fall outside MPM scope because they do not represent subtotals of income and expenses not required by IFRS.
• Agree on disclosures format with auditors, including insurance service expenses disclosure by nature, breakdowns of “other” line items, and MPM reconciliations.
• Start preparing granular data now for additional disclosures, including 2026 information for expense-by-nature and MPM reconciliations.