KUALA LUMPUR: The year 2022 promises to be an interesting yet challenging one for the insurance industry arising from the post-International Financial Reporting Standard 17 (IFRS 17) implementations, Bernama reported, quoting Deloitte.

       Malaysian Financial Reporting Standards (MFRS) 17 issued by the Malaysian Accounting Standards Board is equivalent to the IFRS 17 Insurance Contracts as issued and amended by the International Accounting Standards Board.

       The aim of MFRS 17 is to increase consistency, comparability, and transparency in financial reporting across the insurance industry.

       Deloitte pointed out that the adoption of MFRS 17 is expected to have significant impact on the fundamentals of the insurance business and its financial management.

       Thus, it is critical for insurers to review their strategies to ensure they adapt post-MFRS 17, it pointed out.

       “The MFRS 17 will fundamentally change the way insurers approach product design and pricing, asset liability management, taxation and performance, and risk management.

       “Beyond focusing on the upcoming compliance timelines, insurers need to evaluate the implications of MFRS 17 across these areas and ensure they are well understood.

       “This can help avoid potential surprises and the need for costly re-work post-implementation,” it said in a statement.

       Deloitte said insurers would have to fundamentally examine the design and pricing of insurance products with the implementation of the new standard, according to Bernama noted.

       “They also need to take into consideration additional factors arising from MFRS 17 adoption during the product pricing process, including measurement models, contract boundary, mutualisation, contract grouping, onerous contract, and amortisation factor,” Deloitte said

       For Asset Liability Management (ALM) re-optimisation, both MFRS 17 for insurance contracts and MFRS 9 for financial instruments will impact presentation of financial statements and economic results.

       Deloitte said insurers need to evaluate their ALM strategies and implications on the presented financials under these new standards.

       As for redesigning key performance and risk indicators, it said most performance metrics, such as profit, return on equity, and return on asset will be affected under the new standard.

       “Individual performance assessments linked to these metrics will have to be re-evaluated and monitored,”it said.