The Insurance Authority of UAE (IA) laid out the financial regulations for insurance companies in the Board of Directors’ Decision Number (25) of 2014. This details the regulations pertinent to solvency margins, minimum guarantee funds as well as the basis of calculating the technical provisions. Further, it lists the data and documents that companies in the insurance industry are required to maintain for the authority. 

Companies are obligated to put in place internal processes for risk management and mitigation, as the regulations provide strict guidelines on risk identification and policyholder protection. As a result, a uniform regulatory regime has been established in the UAE for the insurance industry.

Upon the implementation of IFRS 17, insurance companies will be required to adhere to new principles of recognition, measurement, presentation, and disclosure. For example, IFRS 17 requires the calculation and presentation of Contractual Service Margins which is in addition to the requirements listed by the IA.

IFRS 17 also requires the initial recognition of contracts at the amount of fulfilment cash flows, adjusted to reflect the time value of money, which has not been provided for in the Board of Directors’ Decision Number (25) of 2014.  

However, Section 7 of the Decision requires insurance companies to prepare their financial statements in line with the International Financial Reporting Standards. This permits accountants/external auditors to perform additional duties in terms of disclosure and presentation, in such a way that they adhere to IFRS 17 without contravening the law.

Accountants will have to work closely with management to align processes such that IFRS 17 standards are met in terms of recognition and disclosure without compromising risk management procedures and policyholder protection. A harmony must be established between accounting and actuarial processes.

A need arises to collate comparison data on how contracts have been valued till date and how they will be revalued post-January 2023.

IFRS 17 focuses more on profitability of insurance contracts and recognition of the same. Hence, it has the potential to impact core processes, insurer incentives, product development and much more. As the IFRS is a principle-based approach, it provides companies with the flexibility to implement without breaching local laws. However, it requires intensive analysis and thorough knowledge of accounting standards and the legal framework.

Is IFRS 17 applicable to you and if so, are you compliant?

If you are not sure, feel free to Contact Us to find out more