IFRS 17 and Solvency II: A Comparative Analysis
IFRS 17 and Solvency II: A Comparative Analysis

Author(s): Enkeleda Shehi, Roel Shehi
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: IFRS17; Solvency II; Regulatory frameworks; Insurance markets; Financial reporting; Capital requirements; General Measurement Model; Contractual Service Margin
Summary/Abstract: This paper explores two key frameworks in the insurance industry: IFRS 17, an accounting standard implemented in 2023 to unify global insurance contract reporting, and Solvency II, a regulatory regime established in 2016 to ensure capital adequacy and risk management within the EU. While both aim to enhance transparency and financial stability, they differ in scope, purpose, and application. IFRS 17 focuses on long-term profit recognition using concepts like the General Measurement Model (GMM) and Contractual Service Margin (CSM), while Solvency II emphasizes short-term solvency through market-consistent valuations. Key differences include risk adjustment methodologies and the specification of liquidity premiums. This paper also addresses challenges in operational implementation, costs, stakeholder expectations, and data integration. Despite these hurdles, the synergies between the frameworks present opportunities for harmonization, improved transparency, and stakeholder confidence, marking a significant step forward for global insurance markets.

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