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The insurance sector has long been a special case when it comes to financial reporting. The complexity of insurance, its long-term nature and the inherent difficulty in identifying 'revenue' as any other business would understand it has set it apart—with the result that an insurance company’s financial statements look and feel unlike any other. But that will change in 2021 with the implementation of the IASB's new global Standard, IFRS 17 Insurance Contracts.
The new Standard represents a seismic change not only for the insurance companies that will use it but for the user community, and particularly for analysts covering the sector across the world. Some compare the scale of the change to the 2005 adoption of IFRS Standards in Europe; insurers' financial statements and key performance indicators will be radically transformed. 'I’ve been covering the insurance sector for almost 20 years and it’s by far the biggest change I have seen,' says Doug Young of Desjardins Capital Markets in Canada.
While many are expecting a turbulent bedding-in period when the Standard first comes into effect, insurance analysts across the world believe it will make a huge difference to the consistency and comparability of insurance companies.