Managing Expenses as part of IFRS 17 Reporting

The implementation of IFRS 17 has presented significant challenges for insurers, particularly in the area of expense management and allocation.

Many insurers have struggled to navigate the complexities of the standard, often leading to unnecessarily intricate processes and reporting. This complexity highlights the need for practical guidance and solutions.

This paper introduces some common challenges insurers face when adopting IFRS 17 for expenses. Our approach focuses on future-proofing design, bringing valuable insights and experience from peer organisations that have successfully implemented IFRS 17 and have since gone on to achieve greater transparency and building a solid foundation for cost optimisation.

IFRS 17 - the standard:

First attempts have created learnings around how best to manage and report allocated expenses: “an allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts to groups of contracts (“GICs”) using methods that are systematic and rational”.

Desired outcomes and benefits:

• Establishing accurate and consistent IFRS reporting
• Business unit performance analysis Understanding of true operating profit
• Ability to manage costs more effectively Evaluate the business case for Outside Service Providers (OSPs)

Allocation pain points for insurers:

IFRS 17 expense allocation is still being understood. As such many insurers are getting it wrong, often resulting in increased granularity and therefore inherent complexity.

Managing expenses purely for IFRS 17 risks becoming a separate reporting effort that does not align to how the business is managed.