IFRS 17 - the most important assumptions of the regulation

IFRS 17 signifies a major change in financial reporting for insurance companies.

Less and less time left to prepare for the changes

The new IFRS 17 international financial reporting standard for insurance companies revolutionises the method of valuation and the principles of calculating profits and losses in each accounting period. In accordance with the decisions of the International Accounting Standards Board (IASB) taken at the last meeting on 11 December 2019, it may become effective at a later date than from 1 January 2022. The IASB Council assured that by mid-2020, it would provide all its remarks and proposals for changes in this area.

This regulation aims to ensure greater transparency and comparability to standardise the approach to the accounting treatment of contracts and to harmonise accounting rules within a single capital group. It is more complex and based mainly on estimates and assumptions, so as to take into account current trends of change, where valuation containing the experience of companies, their history and time value of money is important. The standard implementation process is long and difficult, therefore appropriate preparations must be started as soon as possible.


The most important assumptions of the regulation

Which entities are affected by the new reporting standard?

The new IFRS 17 issued by the International Accounting Standards Board (IASB) will mainly affect long-term insurance providers, i.e. life insurance companies. However, this is not the only group. Non-life insurers will also notice changes in reinsurance accounting. The impact of the new standard on reporting will also largely depend on the size of the insurance company and its portfolio.

IFRS 17 will have a significant impact also on other companies such as banks issuing reinsurance or investment contracts that contain an insurance component.

Insurance contracts are to be measured based on three basic principles:

  • discounted probability-weighted cash flows
  • unambiguous risk adjustment
  • a contractual service margin margin ("CSM"), which is an unrealised gain on a contract that is evenly distributed.

What is changing with IFRS 17?

Examples of strategic changes concerning the accounting standards currently applied:

  • All cash flows will be based on current assumptions, whereas currently, for some insurance contracts (often issued abroad), insurance is measured on historical assumptions.
  • Revenue will be more consistent with IFRS 15, excluding deposit elements, and will not be recognized on a cash basis, as is currently the case for life insurers.
  • Measurement will require historical data such as discount rates and unrealized gains. These data are not collected for current accounting and regulatory reporting.
  • The calculation will be less detailed than the calculations currently used by many insurers.


The impact of the new standard will be visible on many levels, going far beyond the financial, actuarial and systems development spheres. It may also affect other areas of activity, such as the shape and distribution of products, incentive plans and broader rules on remuneration or budgeting.

It is also possible that IFRS 17 will have an impact on the payment of taxes and dividends, which will depend on local regulations. The introduction of IFRS 17 will be a major challenge for many insurers, but also an opportunity for improved accounting practices and comparability to improve investor perception of the sector and reduce its cost of capital in the future.

The detailed impact of IFRS 17 on market players will be known when the standard comes into force, but it will certainly play a key role in further developing and improving the quality of reporting.

The biggest challenge for insurance companies to prepare for the implementation of IFRS 17 is to adapt their IT, actuarial, accounting, internal audit and reporting processes and systems. Although the standard will be in force only from 2022, it is worth starting preparations for its implementation as soon as possible.


In accordance with IFRS 17 valuations will require historical data such as discount rates and unrealized gains. These data are not collected for current accounting and regulatory reporting.

PwC experts've prepared fully automated IFRS17 reporting process including calculation of PVFCF, RA, CSM, LC covering all methods (GA, VFA, PAA) for life and non-life business: IFRS17 software.

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Arkadiusz Kramza

Arkadiusz Kramza

Partner, PwC Poland

Tel: +48 519 504 424

Grzegorz Józefiak

Grzegorz Józefiak

Director, PwC Poland

Tel: +48 519 506 759

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