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.

1. Focus your roadmap: If you have not already developed an implementation road map, do so immediately. If you already have an existing road map, now is the time to take a step back and ask whether it is practical and achievable given the other demands on your time, your available resources, the additional year and the amendments. Cross-check progress against plans. Don't forget to consider any areas that have been on hold while amendments have been under discussion. Ensure you have the right tools and capabilities to achieve all objectives by 2023.
2. Drill down into changes: Analyse the impact of the changes for your specific business and implementation plans, what further tasks are required to make the changes operational and what opportunities they open up. Consider a phased approach - starting to test solutions at scale while evaluating the amendments in the test lab and then phasing them into roll out plans.
3. Practice, practice, practice: The additional time means more time for test runs and parallel runs. Recognize that delivering IFRS 17 results will require multiple iterations, challenge and oversight before sharing with the outside world. Particularly for the more advanced organizations, this additional year offers valuable time to ensure tools, processes and people are ready for implementation. Also, don't forget to allow ample time to design, test, and implement new controls around the revised and new processes.
4. Talk to stakeholders: Use the extra year to strengthen communication with the business, subsidiaries and stakeholders. It will be critical to build into your implementation program time to help stakeholders understand what your IFRS 17 financial results will look like and how to interpret those results. Review current performance metrics and identify the drivers of IFRS 17 results. Work with the business to consider what metrics can be continued, which need refreshing and what needs to be replaced. Consider briefing investors and analysts early and throughout your journey on the approach and progress.
5. Look for opportunities: Despite cost contraints don't overlook the potential for related opportunities on the road to implementation. Consider using IFRS 17 as the catalyst to streamline your finance and actuarial capabilities. Spending the time to understand your data architecture, i.e. the data flows and interfaces throughout your end-to-end processes, can help you understand what can be done to simplify, standardize and automate financial and actuarial processes taking out cost in the longer term. Find opportunities to streamline. And look for commercial opportunities to optimize reinsurance arrangements, product design and pricing and asset liability management. Consider strengthening the links between the two by enhancing planning and performance management.

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.

1. Welcome relief for 'front-runners'
   For the fortunate few who started work ahead of the standard being issued, and have the discipline to regularly update their work plan to accommodate change, one option might be to press ahead, using the additional time for further dry runs, to learn to steer their business on the new basis and to transfer to business as usual ahead of the effective date. Others will use the time to streamline their finance and actuarial capabilities, automating where possible and rethinking processes to improve agility.
   
   
2. A wake-up call for 'late starters'
   But what about any late starters, who are not as progressed as they would like to be1? The problem facing the unprepared is not just one of increased risk of noncompliance. It's also that they will likely face much higher operating costs in the future as they work to catch up with those that took the time to investigate the challenges thoroughly and invest in automation, and have put themselves at the back of the line to access a fast-draining talent pool. We urge these insurers to use the new timeline and proposed amendments as a wake-up call to accelerate progress.
   
   
3. A reality check for perfectionists
   In an attempt to reach the perfect answer, some insurers find it difficult to land accounting and actuarial judgments or identify their target architecture and select a software solution provider. If that sounds like you, we would strongly recommend using the deferral as a shot in the arm to re-invigorate your program, with a focus on right to left thinking that compares where you need to get to with where you are now. Perhaps you've held off from a detailed evaluation of the impact of IFRS 17 on reinsurance ceded, in the hope that the standard would be updated. That hope has been addressed and so the time to progress at pace is now.

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