IFRS 17 will transform insurance accounting. Ever since the new standard was announced, we have advised IFRS filers to prepare for the single biggest evolution in insurance reporting — larger than the implementation of IFRS and even greater than Solvency II.
The new standard presents significant challenges to prepare and implement, particularly as many insurers will be implementing IFRS 9 at the same time.
Despite the proposed one-year deferral of the effective date to 1 January 2022, there is still a vast amount to do to prepare for a successful transition. It is critical that this additional time is used wisely.
How does your implementation progress match up with your peers? Our latest global benchmarking survey found significant differences between entities.
Even though the additional year is a welcome bonus, many insurers — large and small — were hoping for a longer extension. Some 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. And most recognize they need more time with their software vendors to test, validate and configure their solutions to fit their unique business needs. All in all, most insurers find that these essential steps are time-consuming and complex.
The one-year deferral does not just hit the reset button on the implementation countdown clock. The goalposts are also being moved to reflect proposed amendments to the standard. While most insurers will welcome these changes, insurers will need to analyze and assess, update their implementation plans and then execute them. When the standard was initially issued, insurers had approximately three and a half years to its effective date. But with the one-year deferral, there is now less than three years on the clock.
What can insurers do to make the most of the time given? We focus on the following five key areas in our discussions with insurers around the world.
But this additional year also brings challenges. There is the obvious concern whether the IASB’s proposed changes will make the standard more meaningful and less complex to implement. And, many will struggle to ensure employees and top management continue to prioritize the project. For those that have already started their IFRS 17 journey, what was already long-haul just got longer — and sometimes more costly.
Avoiding project fatigue by keeping everyone motivated and aligned is priceless, especially if disruptions arise over the next three years. Breaking the program down into manageable sprints and rotating people on and off the program’s lifecycle can help the project stay on track. And moving staff into the program allows people to:
One size doesn’t fit all and entities need to figure out the right pace to suit their culture and goals. Some entities are only aiming to achieve compliance for local reporting. But for others, it represents a whole new language for their business.
While the extra year will provide welcome wiggle-room for many insurers, it will still take hard work and tight timelines to guarantee you are fully prepared. Insurers need to take full advantage of this extra year. With the proposed amendments, it’s a bigger window of opportunity than many dared hope for.