IFRS 18 Arrives in 2027: Why Insurers Need 2026 Comparatives Now

From reviewing IFRS 17 restated disclosures across 18 European insurers' 2024 annual reports, the second-year presentation choices already tell you where IFRS 18 operational lift will concentrate. IFRS 18 Presentation and Disclosure in Financial Statements is effective for annual reporting periods beginning on or after January 1, 2027. Because the standard requires full comparative information for the prior period, every IFRS reporter is currently producing those 2026 comparatives. For insurers, whose primary performance line (the insurance service result) comes from IFRS 17 rather than from ordinary trading revenue, the mapping into IFRS 18's new operating, investing, and financing categories is not mechanical. Choices made during the 2026 transition year lock the story investors will read at December 31, 2027 close.

This article walks through the IFRS 18 effective date and the comparative-year mechanics; the interaction with the IFRS 17 insurance service result and reinsurance contracts held; the new required subtotals and how insurance amounts map into operating, investing, and financing; where KPMG's 2024 illustrative disclosures for insurers show first-year practice has settled; what EY's global observations from year-end 2024 suggest about second-year behaviour; the actuarial team involvement required to populate CSM-linked and risk-adjustment-linked line items under the new presentation; and the specific composite-insurer problem that life-and-non-life groups face.

The Effective Date and Why 2026 Is the Transition Year

The International Accounting Standards Board issued IFRS 18 in April 2024, replacing IAS 1 Presentation of Financial Statements. The standard applies to annual reporting periods beginning on or after January 1, 2027. Earlier application is permitted, although the insurer population adopting early has been small.

IAS 1 required comparative information for the preceding period, and IFRS 18 preserves that requirement. An insurer with a calendar year-end will present its December 31, 2027 financial statements with full 2026 comparatives prepared on the IFRS 18 basis. The practical consequence is that the statement of profit or loss, the statement of cash flows, the management-defined performance measure (MPM) disclosures, and every aggregation/disaggregation judgement applied in 2027 need a parallel data set for 2026. An insurer that waits until the 2026 annual close to design the new presentation is already behind, because the opening of 2026 was the quiet start of the comparative year.

IFRS 18 is the first broadly applicable overhaul of financial statement presentation since IAS 1 was issued in 1997. The headline change is the introduction of three defined categories in the statement of profit or loss (operating, investing, financing) and two new required subtotals: operating profit and profit before financing and income taxes. The standard also imposes new requirements on the aggregation and disaggregation of information, disclosure of MPMs (previously managed under non-GAAP investor communications), and changes to the classification of cash flows from interest and dividends. For insurers, each of those changes interacts with an insurance-specific accounting architecture that only settled in 2023 with IFRS 17 implementation.

Where the Insurance Service Result Fits in the New Categories

IFRS 17 introduced a profit or loss architecture that puts the insurance service result at the top of the income statement. The result consists of insurance revenue (the earning of CSM, expected claims and expenses, and release of risk adjustment for non-financial risk), less insurance service expenses (incurred claims and expenses, amortisation of insurance acquisition cash flows, losses on onerous contracts). Reinsurance contracts held generate a parallel net expense (or net income) line. Finance income and expense from insurance and reinsurance contracts issued and held are typically shown separately, with an accounting policy choice on whether to disaggregate insurance finance income and expense between profit or loss and other comprehensive income.

IFRS 18 defines the operating category as the residual: income and expenses that are not classified as investing, financing, income taxes, or discontinued operations. For a specified sub-population of entities (including insurers), IFRS 18 requires additional items to be classified in the operating category even where those items would otherwise sit in investing or financing. Specifically, for an entity that provides insurance contracts to customers as a main business activity, income and expenses from investments that relate to insurance contract liabilities and from insurance financing activities are classified in the operating category rather than in investing or financing. This is the single largest insurer-specific override in IFRS 18 and the one that determines how the insurance service result interacts with the rest of the statement.

The practical effect: for a pure-play life or general insurer, operating profit under IFRS 18 captures both the insurance service result and the investment return on the asset portfolio that backs insurance liabilities, together with insurance finance income and expense. That mirrors the way insurance analysts already think about the business, but it requires disciplined identification of which investments relate to insurance contract liabilities. The categorisation is not automatic from the balance sheet. An insurer holding surplus assets beyond what supports insurance obligations still presents investment income on those surplus assets in the investing category under IFRS 18. The split is a substantive judgement, not a mechanical allocation, and auditors will expect a documented basis for that split in the transition year.

The Two New Required Subtotals

IFRS 18 requires two subtotals in the statement of profit or loss that did not exist under IAS 1: operating profit or loss, and profit or loss before financing and income taxes. A third subtotal, profit or loss before income taxes, continues as before. The combination of these three subtotals is intended to give a common structure across reporters so that operating performance, the effect of financing choices, and the effect of tax can be separated consistently.

For insurers, the operating profit subtotal will typically be the first line comparable across peers. Under the current IFRS 17 regime, insurers present a range of non-GAAP measures (insurance service result, normalised operating result, adjusted operating profit) that differ in how they treat investment return and insurance finance income. IFRS 18 forces a convergence point. Management-defined measures can still be disclosed, but they are now subject to a formal MPM disclosure regime that requires reconciliation to the nearest IFRS-specified subtotal and explanation of how the measure is calculated and why it provides useful information.

From reviewing the second-year IFRS 17 financial statements of the 18 European insurers I followed through their 2024 annual reporting cycles, the variety in presentation of the insurance service result and related finance lines is the most pressing issue IFRS 18 will resolve. Three distinct templates were in common use: a two-column format separating underwriting and investment returns; a single-column vertical presentation running from insurance revenue down to profit before tax; and a hybrid format that aggregated insurance and investment income into a top-line total revenue figure. Only one of those three will survive IFRS 18 without rework. Insurers using the two-column format are most exposed to rework because the new required subtotals are inherently single-column.

Aggregation, Disaggregation, and the Line Item Problem

IFRS 18 sharpens the requirements around how information is aggregated or disaggregated on the face of the primary financial statements and in the notes. The standard requires items to be classified and grouped by shared characteristics and prohibits aggregation that obscures material information. It also requires disaggregation in the notes where face-of-statement presentation does not provide sufficient information to understand the entity's performance.

For an IFRS 17 reporter, the standard insurance service result line already sits at a high level of aggregation. Insurance revenue is a composite of CSM amortisation, expected claims, expected expenses, and risk adjustment release. Insurance service expenses aggregate incurred claims, expenses, loss component movements, and acquisition cost amortisation. The disaggregation judgement under IFRS 18 is whether the mix of characteristics within these totals is homogeneous enough to remain aggregated on the face of the statement, or whether users need separate line items for the dominant components.

The KPMG IFRS 17 Illustrative Disclosures for Insurers (2024 edition) sets out a first-year practice pattern that most reporters followed: a single insurance revenue line with disaggregated components in the notes, and an insurance service expense line broken down into incurred claims, acquisition cost amortisation, and changes relating to past service and onerous contracts in the notes. Under IFRS 18, that pattern is likely to hold, but the operating-category override for insurance-linked investment income will push additional line items onto the face of the statement to distinguish operating investment return from other investment return.

The CSM Roll-Forward and Risk Adjustment Line Items Under New Presentation

The Contractual Service Margin is the deferred profit recognised in the insurance contract liability at initial recognition and released to profit or loss as services are provided. CSM amortisation is a component of insurance revenue under IFRS 17. Under IFRS 18, the statement of profit or loss does not typically show CSM amortisation as a separate line. Instead, the note disclosures reconcile opening-to-closing CSM in the contractual service margin roll-forward, and the income effect of CSM amortisation flows into insurance revenue as part of the operating category.

The actuarial operational lift in the transition year is concentrated in three places. First, the CSM roll-forward itself continues as an IFRS 17 disclosure, but the opening 2026 balance that anchors the 2027 comparative must be prepared on a basis consistent with how 2027 will be presented. Any change in accounting policy choice under IFRS 17 (for example, the decision on whether to disaggregate insurance finance income and expense between profit or loss and OCI) needs to be settled for the comparative period, because retrospective restatement of the 2026 comparative for a 2027 policy change is a more complex path than getting the choice right in 2026.

Second, the risk adjustment for non-financial risk release profile interacts with the operating category. The risk adjustment released through profit or loss is a component of insurance revenue and sits in the operating category. The risk adjustment release profile is an actuarial judgement (based on the confidence level disclosed and the release pattern aligned with the pattern of risk relief). For a carrier that has been relatively stable in its risk adjustment methodology since the 2023 IFRS 17 go-live, the 2026 comparative is a straightforward continuation. For a carrier that revised its confidence level or release pattern during 2024 or 2025 (the EY IFRS 17 and IFRS 9 insurer reporting observations suggest methodology refinements were common in the second year), the 2026 comparative period needs to be restated on the current methodology to preserve comparability with 2027.

Third, the loss component mechanics for onerous contracts interact with the insurance service expense classification. Initial recognition losses and subsequent loss component movements are recognised immediately in profit or loss. Under IFRS 18, these sit in the operating category as part of insurance service expenses, but the disaggregation requirement may push loss component movements onto the face of the statement if they are material to understanding performance. Insurers with onerous contract losses that were material in 2024 or 2025 (common in long-duration health, long-term care, and some annuity lines) will need to make a disaggregation call for the 2026 comparative that matches the 2027 presentation.

Reinsurance Contracts Held: Net vs. Gross Presentation

IFRS 17 requires reinsurance contracts held to be presented separately from insurance contracts issued. The net income or expense from reinsurance contracts held appears as a separate line in the insurance service result, and reinsurance finance income or expense is separated in the finance section. Under IFRS 18, the reinsurance net line falls in the operating category for an insurer whose main business activity is providing insurance contracts, and the reinsurance finance effect follows the same operating-category override that applies to direct insurance finance income and expense.

The KPMG 2024 illustrative disclosures present the reinsurance-held net line as a single number on the face of the statement, with disaggregation in the notes between allocation of reinsurance premiums paid, amounts recovered from reinsurers, effects of changes in reinsurance risk, and amounts relating to loss-recovery components for reinsurance contracts held that cover onerous underlying contracts. That pattern is likely to continue under IFRS 18, but the aggregation test (whether the shared characteristics of these components warrant single-line presentation) is a fresh judgement under the new standard.

Reinsurance-dominant business models (life reinsurers, Bermuda composite reinsurers, specialty property reinsurers) will have a different presentation problem. For a pure reinsurer, the distinction between inwards business and retrocession held looks similar in magnitude, and the operating category captures both. The Bermuda reinsurance business models that mix asset-intensive annuity reinsurance with property catastrophe retrocession are likely to make the most extensive use of the operating-category override, because the investment return on asset-backed reinsurance liabilities is by far the dominant income stream, and IFRS 18 pulls that return into operating profit.

The Composite Insurer Problem

Composite insurers write life and non-life business through the same legal entity or within the same consolidated group. Under IFRS 17, the measurement models for the two segments differ: the general measurement model or variable fee approach for life, and typically the premium allocation approach for non-life short-duration contracts. Under IFRS 18, both streams feed into the operating category, but the disaggregation requirement creates a new question. Does the user of the financial statements need life and non-life insurance service results presented separately on the face of the statement, or is the segment note sufficient?

From the 2024 annual reports of European composite insurers (Allianz, AXA, Aviva, Generali, Zurich, NN, Munich Re, Swiss Re and several others), the dominant first-year pattern under IFRS 17 was to present a single consolidated insurance service result on the face of the statement, with segmental breakdown in the operating segments note. That pattern will be put to a sharper test under IFRS 18 because the aggregation-and-disaggregation test is explicit. A composite where the life segment contributes a steadily amortising CSM-driven earnings stream and the non-life segment contributes a combined-ratio-driven underwriting result has mixed characteristics by construction. Whether those characteristics are shared enough to warrant aggregated presentation is now a disclosure question with a documented audit trail, not an unstated presentation convention.

The composite-insurer problem interacts with a related question about IFRS 9 financial asset presentation. Life insurance groups have typically used fair value through profit or loss for assets backing unit-linked and variable fee approach business, and fair value through other comprehensive income for assets backing life general measurement model or non-life reserves. Under IFRS 18, those investment income streams are in the operating category for assets backing insurance liabilities, but the mix of fair value changes and realised gains or losses presents a disaggregation question on the face of the statement that IAS 1 never directly posed.

Management-Defined Performance Measures: New Disclosure Discipline

IFRS 18 introduces a formal disclosure regime for management-defined performance measures. An MPM is a subtotal of income and expenses, used in public communications outside the financial statements, that communicates management's view of an aspect of financial performance. For insurers, this scoops up a list of widely used metrics: underlying operating profit, adjusted combined ratio, normalised CSM amortisation, return on solvency capital, underlying earnings per share, operating profit after adjusting items.

The disclosure requirements are specific. For each MPM, the notes must describe how the measure communicates management's view, reconcile the measure to the most directly comparable IFRS-specified subtotal (operating profit, profit before financing and income taxes, profit before income taxes, or a total or subtotal listed in the standard), explain each reconciling item, explain the tax effect and non-controlling interest effect of each reconciling item, and explain any change in how the MPM is calculated or a change in which MPM is used.

The operational lift here is the same transition-year lift the comparatives create. An insurer that wants to preserve its existing set of MPMs in the 2027 annual report needs the 2026 MPM calculations on the same basis and reconciled to the same IFRS-specified subtotal. Because IFRS 18 introduces operating profit as a subtotal that does not currently exist, the reconciliation anchor is new. Insurers that have historically reconciled adjusted operating profit to profit before tax will need a parallel reconciliation to operating profit for the comparative. Insurers that have communicated combined-ratio-based adjusted underwriting metrics will need to articulate the operating profit reconciliation explicitly.

Cash Flow Statement: Classification of Interest and Dividends

IFRS 18 changes the cash flow statement classification of interest and dividends. Under IAS 7, insurers typically had an accounting policy choice for how to classify interest received, interest paid, dividends received, and dividends paid. IFRS 18 removes much of that choice: for entities that are not financial institutions, interest paid is classified in financing, and interest and dividends received are classified in investing. The insurer-specific override changes that position somewhat. For an insurer whose main business activity is providing insurance contracts, interest and dividends received on investments that relate to insurance contract liabilities are classified in operating cash flows rather than investing, to match the operating-category profit-and-loss treatment.

The cash flow statement comparative for 2026 therefore needs to be restated under the new classification rules. For a group that historically chose to present interest paid in operating cash flows, a reclassification from operating to financing changes the operating cash flow headline number that insurance analysts track. The net cash position does not change, but the individual subtotals do, and the comparative period needs the restated numbers to make 2027 meaningful.

What EY's 2024 Observations Suggest About Second-Year Behaviour

EY's global observations from year-end 2024 insurer financial statements, compiled across their IFRS 17 and IFRS 9 reporting observations work stream, identify three persistent patterns that IFRS 18 will confront. First, second-year presentations showed noticeable convergence toward the insurance service result as the primary operating-performance line, with investment return presented separately. IFRS 18 will formalise this convergence through the operating-category override, which pulls investment return on insurance-liability-backed assets back into operating. Second, CSM-related disclosure practice continued to evolve, with more insurers disclosing confidence level ranges and risk adjustment release sensitivities. IFRS 18's aggregation-and-disaggregation discipline supports this direction and will likely push more disclosure onto the face of the statement. Third, insurance finance income and expense OCI elections remained split across the peer group, with some insurers using the OCI option for life business and profit-or-loss classification for non-life business. IFRS 18 does not change the underlying IFRS 17 choice but does change how the finance line is categorised (operating vs. financing), which makes the choice more visible in investors' reading of the statements.

The practical takeaway from the EY observations is that the second-year IFRS 17 reporting cycle already produced the infrastructure IFRS 18 demands: granular actuarial data, a settled CSM roll-forward architecture, a documented risk adjustment methodology, and disclosure practice around loss components. The IFRS 18 transition is therefore less about building new infrastructure and more about re-mapping existing infrastructure into the new presentation categories and subtotals. The insurers that will find the transition painful are those whose 2024 and 2025 reports relied on presentation conventions that fall outside the new categorisation rules, specifically the two-column presentations and the non-standard aggregated revenue lines.

Actuarial Team Involvement During 2026

The actuarial function owns several of the line items that need to be re-mapped for IFRS 18. The practical involvement during 2026 concentrates on the following:

CSM opening balance and roll-forward architecture. Confirm the 2026 opening CSM balance is consistent with the basis on which the 2027 comparative will be presented. Identify any methodology refinements made during 2024 or 2025 that need to be applied consistently to the 2026 comparative.
Risk adjustment methodology lock-down. The risk adjustment confidence level and release pattern need to be the same between the 2026 comparative and the 2027 period. Document the methodology in a form suitable for audit and for the MPM disclosure reconciliation.
Loss component tracking. Identify onerous contract groups with material loss component balances at the 2026 opening and closing positions. Provide the information needed to judge whether loss component movements should be disaggregated on the face of the statement.
Insurance finance income and expense splits. Confirm the OCI election remains appropriate under IFRS 18's new categorisation. Split insurance finance income and expense between the operating category (for assets-and-liabilities related to insurance contracts provided as a main business activity) and any residual in the financing category.
Reinsurance contracts held. Provide the disaggregation of the reinsurance-held net line between allocation of premiums paid, amounts recovered, effects of changes in reinsurance risk, and loss-recovery components. Ensure the categorisation between operating and other categories is consistent with the direct insurance treatment.
Composite-group segment reporting. For composites, support the operating-segment note with the life and non-life insurance service result breakdown. Document the aggregation judgement for the face of the statement.
MPM reconciliation support. Provide actuarial inputs to the MPM disclosure for any performance measure that includes insurance-specific adjustments (normalised CSM release, underlying combined ratio, adjusted operating profit). Ensure the reconciliation to operating profit or to profit before financing and income taxes is documented.

The Transition-Year Risk: Scrambling Through Q1 2027

The most common failure mode during a comparative-year transition is pushing the presentation design work into the current-period close and finding that the comparative cannot be produced consistently. For IFRS 18 specifically, the failure mode compounds because the standard introduces new subtotals, new classification rules, and a new MPM disclosure regime simultaneously. An insurer that waits until the 2026 year-end close to settle its IFRS 18 presentation design will spend Q1 2027 re-running the 2026 comparative on the settled basis under time pressure, while also producing the first full IFRS 18 period for calendar 2027.

The PwC Canada IFRS 17 for Insurers hub and the IASB's IFRS 18 project page both emphasise that the comparative requirement is a load-bearing piece of the transition. The IASB's Effects Analysis for IFRS 18 explicitly notes that preparers will need to produce comparative figures on the new basis and that the standard's benefits will only be realised if the comparative is prepared with the same rigour as the current period. For insurers, who already have a heavy IFRS 17 close cadence, compressing the IFRS 18 design work into the final months of 2026 is a schedule choice with direct audit and stakeholder-communication consequences.

The insurers that will emerge from the 2027 first-time-adoption cycle cleanly are those that treated 2026 as the operational year for IFRS 18 design and ran the comparative in parallel with the live 2026 IFRS 17 close. The scheduling choice for 2026 is already largely made. By mid-2026, the gap between insurers that are on the parallel-running path and insurers that are planning to design at year-end will be visible in the internal documentation and in the interim-period investor communications.

Why This Matters for Actuaries

IFRS 18 is often framed as an accounting presentation change. For insurers, the presentation change is not the full story. The standard's operating-category override and its aggregation-and-disaggregation discipline push actuarial judgements (CSM methodology, risk adjustment calibration, loss component identification, reinsurance contract disaggregation) into a more visible disclosure context than IAS 1 ever required. The MPM regime puts actuarial-derived normalisation adjustments into a formal reconciliation frame. The cash flow reclassification changes the headline operating cash number that analysts track.

Actuarial teams that supported the IFRS 17 implementation through 2023 and the second-year refinement cycle through 2024 and 2025 are the natural owners of the IFRS 18 transition work during 2026, because they hold the underlying data and the methodology that drives every line item the new presentation touches. The organisational lift is not new; it is the same IFRS 17 data, re-mapped. But the re-mapping is substantive, and 2026 is the year to do it.