IFRS 17 ADOPTION, RISK DISCLOSURE QUALITY, AND FINANCIAL STABILITY: EVIDENCE FROM CONVENTIONAL AND TAKAFUL INSURERS IN SAUDI ARABIA

The adoption of IFRS 17 represents a major regulatory reform aimed at enhancing transparency, comparability, and risk visibility in insurance reporting. Despite its importance, empirical evidence on whether IFRS 17 has translated into measurable improvements in insurers’ risk-disclosure quality and financial stability remains limited, particularly in emerging markets and Islamic insurance systems. Exploiting the mandatory adoption of IFRS 17 in Saudi Arabia in 2023 as an exogenous regulatory shock, this study examines its impact on risk-disclosure quality and financial stability, with a comparative focus on conventional and Takaful insurers. Using a balanced panel of 28 Saudi insurance companies observed over the period 2016–2025, we construct a hand-collected disclosure index based on IFRS 17-specific risk-reporting requirements and proxy financial stability using the Z-score. A difference-in-differences framework with firm and year fixed effects is employed, complemented by robustness analyses. The results show that IFRS 17 adoption significantly improves the quality of risk disclosures and enhances insurers’ financial stability. Moreover, these effects are significantly stronger for Takaful insurers, suggesting that governance and risk-sharing features amplify the benefits of standardized disclosure. The findings contribute to the literature on accounting regulation and financial stability by providing early evidence that IFRS 17 generates real economic effects in an emerging and Islamic finance context, with important implications for regulators, insurers, and market participants.