GCC: IFRS17 transition's net impact on equity reaches -2.5%
Source: Middle East Insurance Review | Jan 2024
Nine months into the year, the progress on the transition to IFRS17 has moved up to 91% as most insurers embrace IFRS17 except a few takaful entities who will likely adopt the standard’s equivalent from 1 January 2025, according to the Q3 2023: GCC Performance Periodical by Insurance Monitor in association with Lux Actuaries and Consultants.
The report, based on a dataset of 78 listed insurers in the GCC region, finds that the combined net impact of transition on equity has reached negative $446m or -2.5% as Oman’s listed insurers disclose IFRS17-compliant financials for the first time in 3Q2023. At the entity level, the positive/negative impacts are as high as 9%/35% respectively for the region.
Further, the report assumes certain adjustments as far as practical to consolidate and interpret the results of all the listed insurers in 3Q2023 and finds an overall increase in net profit as investment income nearly doubled during the period. Underwriting performance, however, has weakened despite a growth of 10.6% in insurance revenue with the exclusion of Saudi Arabia.
Saudi Arabia’s results continue to stand apart with a significantly higher growth in revenue sustained by its booming economy at 27.9% and an improvement of 3.5ppt in the combined ratio that is relatively well-spread across the market as just six insurers have reported technical losses in 3Q2023 compared to 18 in 3Q2022.
The report also observes that solvency recovery plans have seen limited success in the UAE as deficits persist for at least seven insurers in 3Q2023. This includes Insurance House which has seen a second consecutive downgrade this year apart from three other downgrades earlier this year for continued breach of solvency regulations. Similar solvency disclosures for Watania, the holding company of Watania Takaful Family and Watania Takaful General will also likely be required going forward as the new insurance law, effective 30 November 2023, brings holding companies with insurance activities under its purview. The two subsidiaries last disclosed solvency deficits in 3Q2022.
Other notable developments during the quarter include the termination of two mergers in Saudi Arabia following shareholder disapproval of the target entities. That said, the report lists a few capital increase transactions that are in the pipeline in Saudi Arabia ahead of the new minimum capital required by 15 December 2024.