SECP prioritises IFRS adoption for insurance sector

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Tuesday stressed the importance of adopting international reporting standards for modernizing the country's insurance industry, with a deadline of January 1, 2026, for implementation.

Commissioner Insurance, SECP, Aamir Khan, emphasised the critical priority of adopting International Financial Reporting Standards (IFRS) for the insurance sector, particularly IFRS 17, at a seminar organized by the Institute of Chartered Accountants of Pakistan (ICAP).

Khan as any delay in IFRS-17 adoption could lead to Pakistan's market lagging behind international markets. He emphasized the responsibility of stakeholders and SECP as regulators in implementing IFRS-17 and the need for familiarization with its impact on decision-making.

Insurance, Khan said, being an integral component of the overall financial sector, serves as an automatic stabilizer by mitigating the economy’s sensitivity to macroeconomic shocks in addition to being a saving and capital formation tool. "Despite the potential to promote sustainable finance, and support long term risk-taking, the insurance landscape of Pakistan has remained underdeveloped."

The comparison to its peers representing less than 1 percent of GDP, is one of the lowest in the region. As of 2022, the total assets stood at Rs2.42 trillion with the written premium standing at Rs553 billion. Despite the small industry size, and a fragmented structure with 42 active players, but the insurance industry offers tremendous potential.

In this regard, the SECP embarked on the initiative of identifying gaps and challenges in insurance industry, jointly with industry stakeholders, and formulated the 5-year Strategic Plan which was launched in December 2023. One of the key priority areas of 5-year strategic plan is the achievement of financial stability through adoption of International Financial Reporting Standards and Risk Based capital regimes for the insurance industry.

Fundamentally, IFRS 17 is designed to bring about greater transparency and consistency in financial reporting in the insurance industry. Being a globally accepted accounting standard for the measurement of insurance contracts, adoption of IFRS-17 shall allow the international markets to look positively onto Pakistani insurance market, and make the comparative assessment easier.