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Exploring the impact of ECL model application under IFRS9 on belgian insurers

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Silm, Lamiaa ULiège
Promotor(s) : Schumesch, Patrice ULiège
Date of defense : 21-Jun-2023/28-Jun-2023 • Permalink : http://hdl.handle.net/2268.2/17516
Details
Title : Exploring the impact of ECL model application under IFRS9 on belgian insurers
Translated title : [fr] EXPLORATION DE L'IMPACT DE L'APPLICATION DU MODÈLE ECL SOUS IFRS 9 SUR LES ASSUREURS BELGES
Author : Silm, Lamiaa ULiège
Date of defense  : 21-Jun-2023/28-Jun-2023
Advisor(s) : Schumesch, Patrice ULiège
Committee's member(s) : Compagnie, Vincent ULiège
Language : English
Number of pages : 87
Keywords : [en] IFRS 9, IAS 39, Probability of Default (PD), Exposure at Default (EaD), Loss Given Default (LGD), Expected Credit Loss (ECL), Impairment, Credit Risk, Financial Instruments, IFRS accounting
Discipline(s) : Business & economic sciences > Finance
Target public : Researchers
Professionals of domain
Student
Institution(s) : Université de Liège, Liège, Belgique
Degree: Master en sciences de gestion, à finalité spécialisée en Financial Analysis and Audit
Faculty: Master thesis of the HEC-Ecole de gestion de l'Université de Liège

Abstract

[en] IFRS 9 was implemented as a response to the concerns raised by the G20 regarding the complexity and
inefficiency of the previous IAS 39 standard. The primary problem with IAS 39 was the delayed recognition of
credit losses on loans and other financial instruments. To address these issues, IFRS 9 introduces new
impairment rules. This updated standard became mandatory for Belgian insurers starting in 2023.
This thesis undertakes a comprehensive examination of the implementation of the new regulatory
requirement and the preparations made by institutions for adhering to the updated standard. The study begins
by providing an overview of the IFRS 9 standard, elucidating its purpose, and highlighting the key stages
involved in its implementation process. To answer the research question and put the theoretical concepts
highlighted in the literature review into practice, we conducted qualitative research through interviews with
Belgian insurer professionals to address the impact of the expected credit loss (ECL) model and the transition
to IFRS 9 on these institutions through concrete examples of the ECL calculation. In addition, we conducted
case studies of the bank insurers which adopted an early application of the standard to compare the results
and findings with the interview output of these insurance companies, which are KBC and Belfius.
In this context, the results show that the significance of the ECL model under the IFRS 9 impact model varies
amongst institutions depending on the size of the insurance company. The application of the ECL model had
varying effects on different Belgian insurers. Companies such as Ageas Insurance and Baloise primarily
focussed on the implementation of IFRS 17, considering the impact of IFRS 9 to be relatively minor in
comparison. However, for NN Insurance, Allianz Benelux, and Belfius, the adoption of IFRS 9 had a significant
impact on their operations. It improved transparency and brought about alignment between asset values and
liabilities. Moreover, Securex acknowledged the positive consequences of implementing IFRS 9, particularly in
the realm of investment management. The new standard provided an additional layer of protection by
facilitating the long-term analysis of credit risks. This enabled Securex to make more informed decisions and
effectively manage its investments.
It is recommended to continuously monitor and improve the application of the Expected Credit Loss (ECL)
model. Insurers should establish mechanisms to regularly review and assess the quality of data, performance
of the model, and adherence to regulatory requirements. This ongoing monitoring enables insurers to identify
areas that require improvement, adjust the ECL model according to evolving market conditions, and effectively
address emerging risks. By doing so, insurers can enhance the application of the ECL model under IFRS 9,
resulting in more precise and transparent financial reporting, improved risk management practices, and
increased comparability among insurance companies.


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Author

  • Silm, Lamiaa ULiège Université de Liège > Master sc. gest., à fin.

Promotor(s)

Committee's member(s)

  • Compagnie, Vincent ULiège Université de Liège - ULiège > HEC Liège : UER > UER Finance et Droit : Audit and Financial Accounting
    ORBi View his publications on ORBi
  • Total number of views 31
  • Total number of downloads 15










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