IFRS 18: Implications of new presentation, disclosure requirements for insurers

Standard may require insurers to remap accounting systems and reassess MPMs

October 10, 2025

Key takeaways

need to disclose

Insurance companies will need to disclose management-defined performance measures.

income

Insurers will need to reclassify income and expenses into three different categories.

Line Illustration of an atom

Companies will need to understand new aggregation and disaggregation requirements.

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Financial services Financial consulting Insurance

The International Accounting Standards Board’s IFRS 18—Presentation and Disclosure in Financial Statements—will affect the presentation of income and expenses in insurance companies’ financial statements. While IFRS 17—Insurance Contracts—defines measurement and specific categories within the financial statements for insurance companies reporting, IFRS 18 prescribes an overall structure to the income statement, including a new subtotal of “operating profit.” Insurance companies will need to disclose management-defined performance measures, with non-GAAP measures reconciled to IFRS. New principles of financial statement aggregation and disaggregation will apply to all primary statements and notes.

IFRS 18, effective Jan. 1, 2027, replaces the current IAS 1 (Presentation of Financial Statements). Adoption of this new standard may require insurers to remap their accounting system to a new financial statements format. Below, we examine how insurance companies will need to adapt.

Income statement structure

Insurers will need to reclassify income and expenses into three different categories, depending on the nature of the expense: operating, investing or financing. Under IFRS 18, insurance service revenue and insurance service expense are expected to be included in the operating category, along with other items that do not meet the definition of either an investing or financing activity. Insurance companies will also need to specifically present operating profit or loss, as well as profit or loss before financing and income tax.

Management-defined performance measures (MPMs)

IFRS 18 takes the measurement requirements of IFRS 17 one step further for insurance companies, requiring assessment of management-defined performance measures, or MPMs. MPMs are a new concept within IFRS 18, defined as a subtotal of income and expenses that an entity uses in public communications outside the financial statements to convey the entity’s overall financial performance.

Insurance companies will need to consider whether there are MPMs that need to be disclosed in the financial statement notes. The new standard explains that a financial ratio (such as combined ratio or loss ratio) may not be a management-defined performance measure because it is not a subtotal of income and expenses. However, a subtotal that is the numerator or denominator (such as the claims or expenses in the combined ratio) in a financial ratio could be a management-defined performance measure if the subtotal would meet the definition of a management-defined performance measure if it were not part of a ratio. The inputs for financial ratios such as combined ratio, loss ratio and expense ratio may need to be analyzed to determine if the numerators or denominators meet the definitions of MPMs.

Common insurance measures

Measure

Calculation

MPM evaluation

Loss ratio

  • Claims expense divided by earned premium
  • The loss ratio is not an MPM because it is a financial ratio
  • If the claims expense numerator includes some type of income, then the claims expense could be an MPM

Expense ratio

  • (Nonclaims) expenses divided by earned premium
  • The expense ratio is not an MPM because it is a financial ratio
  • If the expense numerator includes some forms of income, it could be an MPM

Combined ratio (COR)

  • Sum of claims and expenses divided by earned premium
  • The COR is not an MPM because it is a financial ratio
  • The expense numerator may be an MPM if it includes both income and expenses

Capital ratio

  • Equity divided by risk adjusted balance sheet
  • The capital ratio is not an MPM because it is more like a financial ratio
  • Numerator and denominator not likely MPMs because they are not typically sums of income and expense

New aggregation and disaggregation requirements

IFRS 18’s aggregation requirements focus on analyzing operating expenses directly on the face of the statement of profit or loss, either by nature, function or using a mixed presentation. The aggregation requirements of IFRS 18 are not expected to change the aggregation policies around grouping insurance contracts into portfolios.

Transition

Along with remapping the accounting system to a new financial statements format, IFRS 18 may require insurers to reassess MPMs. RSM’s experienced teams of actuaries, accountants, consultants, IT and other professionals can help you fully address the new reporting requirements.

RSM contributors

  • David Mamane
    Financial Services Senior Analyst
  • Canadian Insurance Audit Leader
    Liam Neilson
    Partner

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