When the International Accounting Standards Board (the Board) issued amendments to IFRS 17, Insurance Contracts on 25 June 2020 important among those changes is an effective date of 1 January 2023
Of course, an additional year is a bonus. Some insurers face the challenge of applying a complex standard to a myriad of different products. Many have found the new standard's data requirements a tall order. Most recognize they need more time with their software vendors to test, validate and configure their solutions to fit their particular business needs. Taken together, almost all are finding the practical steps needed to implement the standard time-consuming and complex. Many had already implicitly assumed a 2023 effective date.
The 1 January 2023 effective date does more than simply push the reset button on the implementation countdown clock. The goalposts are also being realigned to reflect proposed amendments to the standard -- albeit in ways that most insurers will welcome -- and insurers will need to analyze and assess the changes, update their implementation plans and then execute on them at speed, all while juggling the challenges that CV-19 has presented to their customers, people and business. When the standard was initially issued, insurers had approximately 3.5 years before the effective date. With the issue of the amended version of IFRS 17, the clock now shows less than 18 months until insurers need to present an opening balance sheet on a whole new basis. We all have to raise our game to hit the new targets.
What can insurers do to ensure they are making the most of the time they have been given? In our discussions with insurers around the world, we often focus on five key areas.
But the extra year also brings challenges. Many will likely face challenges ensuring that employees and top management continue to prioritize the project. For those that are well into their IFRS 17 journey, what was already a long-haul just got longer -- and keeping the cost under control even more of a challenge.
Keeping everyone motivated and aligned to overcome project fatigue (particularly given all of the other challenges finance and actuarial teams are facing) is priceless. We find that breaking the program down into more manageable sprints and rotating people onto and off the program throughout its life are techniques that can help the program stay on track. Staff rotations to the program help people to acquire new skills and experience to meet their personal goals, inject new life and energy into the team and spread knowledge as they graduate from the program into new roles.
One size doesn't fit all and entities need to find the right pace of change to fit their culture and ambition -- after all, some entities are tackling this solely to achieve compliance for local reporting. For others, it represents a whole new language to explain their business.
Ever since the new standard was announced, we've been advising IFRS Standards’ filers to prepare for the single biggest evolution in insurance reporting -- certainly bigger than the implementation of the IFRS Standards and even bigger than Solvency II. While the extra year will provide some welcome wiggle-room for many insurers, the reality is that it will take hard work and tight timelines to ensure you are fully prepared.
Insurers need to make the most of the extra year. With the proposed amendments, it's a bigger window of opportunity than many dared hope for.
Mary Trussell, Global Insurance Accounting Chane Lead, KPMG International
Frank Dubois, National Insurance Sector Lead, KPMG in Singapore
Bryce Ehrhardt, Director Insurance Accounting Advisory Services, KPMG in the US