The Securities and Exchange Commission of Pakistan (SECP) has officially announced the adoption of the International Financial Reporting Standard (IFRS) 17 – Insurance Contracts. This adoption is specifically applicable to companies engaged in insurance, takaful, re-insurance, and re-takaful business.
The implementation of IFRS 17 is expected to bring about significant improvements in the quality of information and reporting standards within the insurance industry, ultimately enhancing its global comparability.
The agreed-upon timeframe for the adoption, in collaboration with stakeholders, is set for January 1, 2026. IFRS 17 introduces a framework that obliges insurers to transparently reflect the impact of economic changes in their financial statements. This is aimed at providing timely and clear insights into the financial standing of insurance entities.
The standard also requires insurers to offer improved information regarding current and future profitability probabilities. The enhanced transparency brought by IFRS 17 is anticipated to contribute to long-term financial stability by providing valuable insights that enable timely intervention.
The International Accounting Standards Board (IASB) replaced the previous IFRS 4 – Insurance Contracts with IFRS 17, effective from January 1, 2023. To ensure a smooth transition to IFRS 17, SECP has outlined a four-phase approach for the insurance industry. The phases include gap analysis, financial impact assessment, system design and methodology, and parallel run implementation.
As of now, the insurance industry has completed the gap analysis and financial impact assessment phases. The current phase, “System Design and Methodology,” is actively in progress as the industry prepares for the full implementation of IFRS 17.
This strategic move by SECP aligns with the global shift towards standardized reporting practices in the insurance sector, enhancing transparency and accountability within the industry.
