IFRS 17 will become effective in just about 19 months, with comparative data available for 2022. The issue is pressing, which is why 18 Forbes 2020 Global 2000 insurers that have been implementing IFRS 17 over several years now share their insights with future IFRS 17 adopters.
Still a long and intense way
One reassuring message first: only twenty percent of the companies in our survey have completed end-to-end dry runs across at least part of their business. The majority is still far off from this point. However, this also means that time for optimization is becoming more of a pressing issue or that different project phases may have to be run parallel.
Observations so far
Market observations show that while most of the leading insurance companies have defined their Finance Target Operating Model early on and developed a full suite of policy and methodology papers to guide design and implementations, smaller insurers are still lagging behind. But even among the leaders, not all innovations are designed to guide decisions.
One of the bigger challenges during the implementation phase for most companies is the transition approach, i.e. drawing up their opening balance sheet. As their projects progressed, several companies also realized increasing challenges related to governance and oversight, making it hard to track open issues and interpretations, among other things. One of the least advanced areas in the implementation phase concerns KPIs, management reporting and updating planning and forecasting.
Most companies have not progressed far ahead enough to work on optimizations yet. More focus may have to be put on other topics, such as interim reporting capabilities and building comparatives in the upcoming months.
It’s not easy being a front runner but well worth it
The decision to take the role of a front runner for such a standard bears large risks but the current status of those that have taken on this role also reveals huge opportunities:
- Front runners identified disclosure requirements rigorously at an early stage and use this to guide data requirements and design decisions, avoiding costly rework.
- Front runners defined working assumptions, carefully reviewing these and refining them as interpretations evolve, rather than procrastinating critical decisions.
- Front runners implemented effective governance and oversight from the get-go and understand the need to design and test controls throughout the implementation as well as designing controls over new reporting processes at an early stage.
- Rigorous testing allowed front runners to gain important information from new data feeds, new systems, new processes and new reports and results.
Where are you on the journey?
The opening balance sheet is six months away and many insurers are still fighting complexities with time running out quickly.
The following five techniques may help to re-frame projects and tackle ongoing challenges:
- Check from the right to left: start with the going live date and define all tasks truly needed for the critical path backwards from there
- Work in focused, short sprints: break down tasks on the critical path and don’t forget testing, remediation and re-testing phases.
- Bring in your people: the time spent on building training and on-boarding material can reap dividends if the materials are used multiple times by different people
- Work in parallel: working on tasks in parallel based on consistent working assumptions helps create capacity under pressure
- Build basic first, then refine and optimize: rather than aiming for the target end state in one leap, it may be more realistic to focus on building a basic specification first and focusing on optimization, refinement and efficiency later