Capital & Regulation9 min read

The IFRS 17 Risk Adjustment for General Insurers: Methods and Disclosure

By Jonas Mohamed Osman Abdelghafour

Published 16 September 2026

Setting, calibrating and disclosing the risk adjustment for non-financial risk under IFRS 17, and reconciling it with Solvency II.

Executive answer

IFRS 17 requires a risk adjustment reflecting the compensation an entity requires for bearing non-financial risk, disclosed with an equivalent confidence level. The standard deliberately does not prescribe a method, so the burden falls on the entity to demonstrate that its chosen approach is internally consistent and faithfully reported.

Common approaches

Confidence-level, cost-of-capital and margin-based methods are all used. Whichever is chosen, the disclosed confidence level must be derived from the entity's own view of its distribution, which means a distribution has to exist and be documented even when the headline method is cost-of-capital.

Diversification and allocation

The level at which diversification is recognised is one of the largest judgements. IFRS 17 measures at the level of the entity issuing the contracts, which may differ from the Solvency II group view. Allocating the entity-level adjustment back to groups of contracts requires a stated, stable basis.

Governance considerations

The risk adjustment directly affects the contractual service margin and the emergence of profit, so its release pattern deserves the same scrutiny as its initial calibration. Auditors increasingly ask for a reconciliation between the IFRS 17 adjustment and the Solvency II risk margin, with differences attributed to specific causes.

Conclusion

The risk adjustment is where accounting and actuarial judgement meet most directly. Consistency of basis, clearly documented, is worth more than sophistication of method.

Primary sources

IFRS 17risk adjustmentconfidence level