SECP Notifies Adoption of IFRS 17 For Firms Engaged in Insurance, Takaful Business

The Securities and Exchange Commission of Pakistan (SECP) has notified the adoption of the International Financial Reporting Standard (IFRS) 17 – Insurance Contracts – for the companies engaged in insurance/takaful and re-insurance/re-takaful business. The implementation of IFRS 17 will improve the quality of information and reporting standards in the insurance industry and enhance its global comparability. The new adoption time frame, agreed upon in collaboration with all stakeholder, is January 1, 2026. IFRS 17 requires all insurers to reflect the effect of economic changes in their financial statements in a timely and transparent way. It also requires providing improved information about the current and future profitability probabilities. IFRS 17’s enhanced transparency is anticipated to enhance long-term financial stability by providing valuable information that allows for timely intervention. The International Accounting Standards Board (IASB) had replaced the IFRS 4 – Insurance Contracts, with IFRS 17, effective from January 1, 2023.  In order to ensure a smooth transition to IFRS 17 in an effective manner, SECP has envisaged a four-phase approach for the insurance industry: (i) gap analysis; (ii) financial impact assessment; (iii) system design and methodology; and (iv) parallel run implementation. The insurance industry has already completed the phases of gap analysis and financial impact assessment, and currently Phase 3, “System Design and Methodology,” is in progress.