The Capital Market Authority (the Authority) Of Oman, an apex regulator of the Insurance and Reinsurance Companies in the Sultanate of Oman, has issued a Circular to get ready for the implementation of the new International Financial Reporting Standard – 17, ‘Insurance Contract’ that shall be effective on January 01, 2021.
The IFRS-17 is a complex set of accounting principles that are expected to materially impact liability measurement and profit recognition for insurance and reinsurance companies that shall bring harmony in the financial reporting globally through single accounting practice, which is missing currently, that should help in improving its usefulness, transparency and comparability across various jurisdictions. This standard would play an important role in the accurately determination of the financial position and financial performance of the insurers.
It will require substantial effort for implementing, which needs to significantly modify the insurers financial accounting, reporting & actuarial process, systems and data. It involves to re-strategies their portfolio across their product management and business teams.
Therefore, in view of above the Authority has issued a circular requiring the insurers to be prepared for implementing the IFRS-17 in three phases:
In the First Phase, the insurers need to conduct a gap analysis by comparing the IFRS-17 requirements with the existing systems with respect to the financial and operational aspects. This phase is to be completed by the end of December 2018.
In the Second Phase, the insurers will need to design their internal rules, policies and procedures to adopt the IFRS-17 with respect to processes, systems, data, accounting, setting methodologies, reporting and others areas necessary for this purpose and simultaneously develop a comprehensive plan with its tentative schedule. This phase shall be effective for the period from January to December 2019.
In the Third Phase, the insurers need to implement those rules, policies, procedures designed in the second phase and perform an empirical testing to assess and evaluate the results with the desired outcomes. It would need to have a parallel implementation with the existing system until the desired outcomes are met and proven the accuracy, completeness and stability with effective and efficient reporting frameworks. This phase is to be completed within year 2020.
The Authority is keen to see its industry compliant with the IFRS framework, where the impact of this IFRS 17 on the insurance industry, with respect to the expected enhanced Investors and policyholder’s confidence in the insurers business and its financial results would be positive. It may help to attract new policyholders and potentially new investors due to its transparency, comparability, better understandability of the profits and financial position of the insurers.
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