KPMG calls on Middle East insurers to ramp up focus on IFRS 17 adoption
IFRS 17, the new accounting standard for insurance contracts issued earlier this year, presents significant change for insurance companies in the UAE and the wider Middle East, according to KPMG, the global network of professional services firms providing Audit, Tax and Advisory services, which calls on insurers to speed up their adoption of global standards.
At an insurance seminar held in the UAE, experts from KPMG highlighted that IFRS 17, which will replace IFRS 4 when adopted by January 2021, is predicated to improve transparency by enabling significant changes in the methods used by insurers to record liabilities and profits.
Addressing the participants at the seminar, Emilio Pera, Partner and Head of Financial Services, KPMG Lower Gulf, said: “Even though we anticipate that there is some time before the implementation procedures gain pace and more clarity emerges, insurance companies in the region will need at least a couple of years to overhaul their processes. This is why it’s crucial that all stakeholders understand the exact requirements ahead of the implementation phase.”
In addition to IFRS 17, KPMG representatives reflected on some of the recent regulatory developments and trends shaping the future of the insurance sector in the region.
In recent months, insurance companies based in the UAE have given more attention to regulatory enforced limitations on insurance companies’ exposure to high-risk high-growth assets, such as real estate and equity capital markets.
According to Adil Abid, Partner - Insurance, KPMG Lower Gulf, “The UAE has demonstrated its deep commitment in encouraging insurers to improve their current exposure to debt and equity markets. Doing so will undoubtedly benefit both insurers and consumers in the longer term, especially since regulations are widely expected to bolster growth, compliance and risk management, as well as encourage the establishment of simplified product structures.”
“There is also a concerted effort made by regulators to ensure consistency and comparability of financial statements prepared by insurance companies in the UAE. This may need to be re-visited in light of the significant changes proposed by IFRS 17.”
Participants at the seminar also deliberated over the potential impact of IFRS 9 on insurance companies and the various options currently available to them.