S&P Global Ratings is not expecting to make any rating changes when accounting rule IFRS 17 comes into effect in January 2023, changing the way insurers prepare their financial statements including profit and loss accounts.

The credit ratings agency made the assessment after International Accounting Standards Board delayed the implementation of the new standard by another year.

IFRS 17 is one of the most significant revamps made to insurance accounting in more than 20 years.

The changes include requiring all insurance contracts to be accounted for in a consistent manner, making it easier to compare performance across international markets. A new item called insurance service revenue will take the place of premium revenue in profit and loss (P&L) statements.

“All else being equal, an accounting change should not reshape the fundamental risk of insurance operations,” S&P says. “That said, if insurers change their strategies or operations because of IFRS17 against our expectations, we could see rating actions.”

S&P says it expects insurers will continue to calculate and report net premium written and gross receivables, even when these items no longer need to be reported under the IFRS 17 rule.

The agency says the treatment of risk adjustment, a new item that will be created under the new standard, will likely be viewed as a reserve surplus in its assessment of an insurer’s capitalisation.

Risk adjustment, defined as compensation received by an insurer for taking on insurance risk, can be regarded as a measure of the uncertainty that an insurer faces, or as an additional reserve margin, S&P says.