COMPARISON OF IFRS 17 AND SOLVENCY II DIRECTIVE: IN THE CASE OF LITHUANIAN INSURANCE COMPANIES AND THEIR PARENT COMPANIES

Abstract

Insurance companies preparing financial statements in accordance with International Financial Reporting Standards (IFRS) must comply with IFRS 4 and, from 2023, with IFRS 17, which replaced it, as well as the prudential reporting requirements specified in the Solvency II Directive, which are also relevant for insurers. These regulations have a significant impact on the balance sheet structure, capital adequacy and risk management of insurance companies, therefore there is a need to assess their interaction. The aim of this study is to assess the impact of IFRS 4 and IFRS 17 and the Solvency II Directive on the financial and prudential reporting of insurance companies, based on examples of Lithuanian insurance companies and their parent companies. The tasks include an analysis of the objectives of IFRS 17 and Solvency II and their links with IFRS 4, a comparison of methodologies and an assessment of empirical data. The study applied methods of literature analysis, regulatory documents (IASB, EFRAG, EIOPA) and comparative analysis, as well as an assessment of empirical financial and solvency report data. The results showed that the main differences between IFRS 17 and Solvency II arise from different valuation principles, discount rates and risk measures, which lead to differences in capital adequacy and profitability ratios. The study highlights the need to achieve greater compatibility between these standards and directives to ensure comparability and transparency of reports.