January 2022 marks the opening balance sheets under IFRS 17. Bringing fundamental accounting changes for entities that issue insurance contracts, this is a major hurdle for many. How prepared are Swiss insurers for the new rules that enhance transparency around their financial positions and risks?
Opening balance sheets under IFRS 17 take effect this month. As the pressure grows on those Swiss insurance groups that report under IFRS, KPMG has benchmarked the world's leading insurers to gauge how prepared they are. From a group of 25 global insurers and national champions that have been running IFRS 17 implementation programs for several years, one thing is clear: much more needs to be done to achieve a successful transition, and time is running out.
In our survey of 25 insurers across 16 jurisdictions including Switzerland, we asked insurance executives about four phases of their IFRS 17 implementation. These phases correspond to key blocks of tasks from project launch to go live: 1. Setup, impact assessment and design; 2. Implementation: build, configure and test; 3. Implementation: dry runs; and 4. Optimization: building comparatives and readiness for going live.
The results are striking: 44 percent of respondents have completed end-to-end dry runs of their IFRS 17 systems and solutions across pilot sites and 28 percent have completed multiple iterations of end-to-end test runs. Most of the companies we spoke to are further behind, still completing configuration and systems integration testing.
What is the current state of play?
Understandably, it is in the fourth activity block where most work still needs to be done. Our survey suggests the level of preparedness is generally quite low – lower than might be hoped for as we enter 2022.
From our conversations with insurance groups here in Switzerland, this is no surprise. Companies recognize that there is a lot still to do. Systems integration testing is taking longer than initially anticipated before the amendments required under IFRS 17 can be reflected. This is partly a resourcing issue as many projects await further inputs and detail from teams in the business.
Seven steps to accelerate progress
Our own insights into IFRS 17 requirements, and our takeaways from discussions with our clients, suggest seven steps companies should take right now. These steps will help accelerate their IFRS 17 journeys and position them for a successful implementation.
1. Validate plans for transition
The complexity of IFRS 17's transition requirements should not be underestimated from a technical or operational point of view. Nor should the effort required to build the opening IFRS 17 balance sheet, including refinements and rework. Companies should not delay transition planning and should use pilots to assess, test and validate plans and resource requirements.
2. Take the time to analyze, explain and understand the drivers of results
Experienced resources that know the business should be involved to ensure thorough preparedness and to secure the full extent of information needed.