IFRS 18: What It Means for Insurers
IFRS 18 is the new IASB standard on the Presentation and Disclosure in Financial Statements, effective from 1 January 2027. In addition to this an endorsement is expected by the European Financial Reporting Advisory Group (EFRAG) in Q1 2026. It introduces standardized categories and subtotals in financial statements, aiming to improve consistency and comparability across industries. For insurers, the changes are primarily in how results are presented, not how they are calculated.
IFRS 18 builds on the foundation of IFRS 17 but shifts focus to presentation and disclosure. It introduces five new categories in the income statement, mandates subtotals such as operating profit, and defines a new class of metrics called Management-Defined Performance Measures (MPMs). These changes aim to improve transparency and comparability across sectors, including insurance.
Key Points and Impact on Insurers
No Change in Measurement
The way insurance contracts are measured under IFRS 17 remains unchanged. IFRS 18 affects only the presentation of these results.
Impact: Insurers do not need to revise their valuation models but must adapt reporting formats.
2. Primary Financial Statement Structure Remains
The required components of financial statements are unchanged:
Impact: Existing reporting structures remain valid, but presentation within them must be updated.
3. New Income Statement Categories
Entities must classify income and expenses into five categories:
Impact: Insurance-related items such as revenue, service expenses, and finance income will fall under the Operating category. This reclassification improves clarity and aligns insurers with other industries.
4. Mandatory Subtotals
Subtotals like Operating Profit are now required.
Impact: Enhances comparability across industries and improves investor communication.
5. Management-Defined Performance Measures (MPMs)
MPMs are subtotals used in public communications that are not defined by IFRS standards. These must be disclosed and reconciled.
Impact: Insurance ratios such as Combined Operating Ratios are not MPMs, but insurers must ensure any custom metrics used externally are properly disclosed.
6. Current vs Non-Current Classification
The statement of financial position must present assets and liabilities as current or non-current, unless a liquidity-based presentation is more useful.
Impact: Insurers must review and potentially restructure their balance sheet presentation.
Timeline
What Has Happened
Upcoming Milestones
Industry Impact
Insurers must:
cleversoft Services
At cleversoft, we are committed to supporting insurers through this transition. Our solutions offer:
We are actively working with clients to ensure a smooth transition and will continue to update our tools in line with regulatory developments.