On June 26, 2024, the 3rd online workshop on IFRS 17 – Insurance Contracts implementation challenges, grouped 27 participants representing insurance regulators in the Western Balkans and the Caucasus to participate in a discussion with the World Bank Centre for Financial Reporting Reform.  Two countries from the Caucasus, Georgia and Ukraine, experienced the implementation of IFRS 17 – in 2023. All Western Balkan countries under the program, have delayed the implementation of IFRS 17.

During the workshop, Georgia and Ukraine, reported several challenges in the first year of application of the standard, which relates to a lack of capacity of insurance companies to implement the standard; a number of anomalies in the first application of IFRS 17 have been noted by the regulators and audit reports have been qualified.

In the western Balkans countries have prioritized the implementation of Solvency 2, the European insurance regulatory framework, over IFRS 17. In addition, other reasons delaying implementation relate to the absence of translation of the standard in local language; possible fiscal effects of the implementation of several standards, which application have been delayed; to IFRS insurance accounting capacity issues within local insurance companies.

As the first sets of financial statements implementing IFRS 17, have now been published, the workshop discussed the disclosures of judgements and estimates in the published financial statements, the quality of those disclosures, and the challenges and changes the disclosures identified.  A conclusion of this preliminary review of IFRS  17 implementation is that insurance companies have focused on ‘getting the numbers right’ rather than on disclosures that fell ‘somewhat short of expectations’.

As reported by EIOPA, the European Insurance and Occupational Pension Authority, the impact of IFRS 17 adoption varies across insurance companies. While 46 per cent have seen a downside effect on shareholders’ equity because of the increase in insurance liabilities, 26 percent have seen little effect and 28 percent have seen an increase in shareholders equity because of IFRS 17 adoption.

Also to be noted, 68 per cent of the insurance companies had taken advantage of the possibility y to delay the implementation of IFRS 9 – financial instruments until 2023 to implement both standards at the same time.

The previous workshop in the series, in December 2023, identified key challenges and areas of judgment likely to arise in the first-time application of the standard.  

The next workshop would focus on changes in the KPIs of insurance entities and on the specific experience in Georgia.

The knowledge sharing event was delivered jointly with the ongoing regional program for Western Balkan countries the Road to Europe Program of Accounting Reform and Strengthening Institutions for Small and Medium-sized Enterprises (REPARIS for SMEs) and offered a great opportunity for participants to interact with international experts and regional peers on topics related to financial sector and governance and accountability.