PSAK 74 Expected to Attract Insurance Capital

In order to boost the credibility of the insurance industry, the Financial Services Authority (OJK) has set a target for insurance companies to implement PSAK 74 on insurance contracts by the year 2025. However, this practice is not without its challenges.

PSAK 74 Expected to Attract Insurance Capital

Senior Executive Vice President of IFG Progress, Reza Y Siregar, explained that IFRS-17 or PSAK 74 is a more detailed and consistent accounting approach for insurance contracts, involving risk assessment, estimation of future cash flows, and the separation of contracts into financial components.

The objectives of implementing IFRS 17 include enhancing transparency, consistency, and understanding of the financial information presented by companies. However, its implementation requires significant capital.

"Based on experiences from abroad, IFRS 17 is challenging and costly. Due to the high IT costs, the database system must be clear, especially for companies with subsidiaries, like IFG, which need integration," Reza stated during an interview after the IFG International Conference 2023 press launch in Jakarta on September 13, 2023.

Considering these challenges, Indonesia's state-owned insurance holding company, Indonesia Financial Group (IFG), plans to open discussions on the implementation of PSAK 74 and the future challenges of the insurance industry at the IFG International Conference 2023 on September 19-20, 2023.

Another crucial aspect is the implementation of the Liability-Driven Investment (LDI) principle, which encourages insurance companies and pension funds to choose the right investment strategies to meet long-term obligations and ensure the sustainability of benefits for policyholders.

As previously known, industry players are expected to implement PSAK 74 on Insurance Contracts by January 1, 2025.

To promote the adoption of PSAK 74, on October 31, 2022, OJK established the Steering Committee for the Implementation of PSAK 74, chaired by a member of the OJK Board of Commissioners and comprising representatives from the Ministry of State-Owned Enterprises, Ministry of Finance, Indonesian Institute of Accountants, and the Financial Accounting Standards Board.

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