RAM Ratings: No credit implications of MFRS 17 on RAM’s updated credit analysis for insurance companies

Published on 17 Nov 2023.

Share Tweet Email

RAM Ratings has published a criteria paper, Updates on the Financial Measures and Disclosure Formats of Insurance Companies

In response to changes brought about by the new accounting standard, Malaysian Financial Reporting Standards 17 (MFRS 17) Insurance Contracts, which took effect on 1 January 2023, we have updated our disclosure formats for the financial statements of insurance companies and refined the computations of some key financial ratios. 

The key change under MFRS 17 is to recognise profit over the coverage period of the insurance contract instead of recognising profit upfront when premiums are received under MFRS 4 previously. With this change, comparability among insurers as well as with other sectors is expected to improve. The new standard also provides better disclosure. For instance, losses from onerous (i.e. loss-making) contracts are now separately recognised. 

Importantly, the overall economic profit of insurance contracts does not change with the adoption of MFRS 17. Most insurers have indicated that the new standard will not cause a shift in their fundamentals and business strategies. At present, it has no impact on regulatory capital of insurance companies and takaful operators in Malaysia until after 2024 at the earliest, according to Bank Negara Malaysia.

While the new standard entails significant changes in the manner in which insurance profit and liabilities are measured and presented, it does not fundamentally change our approach to assessing an insurer’s credit standing. We do not expect these updates to have any credit implications to the ratings of any RAM-rated issuers or debt instruments. 

The criteria paper can be accessed under the Criteria & Methodology section of our website, www.ram.com.my.


Analytical contacts
Sophia Lee
(603) 3385 2619

Media contact
Sakinah Arifin
(603) 3385 2500


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2023 by RAM Rating Services Berhad

Publication Date Published Category
Updates on the Financial Measures and Disclosure Formats of Insurance Companies 17-Nov-2023 Criteria & Methodology View PDF