What are the contingency plans and fast-track options for IFRS 17?
Even if you haven’t yet started to prepare for IFRS 17, or you’re having doubts about whether your implementation programme will meet the deadline, there’s still ways to get over the line in time and comply with confidence.
Picture the scene. There’s five hours to go before you need to reach your destination. But even with your foot firmly on the accelerator all the way, it’s at best 50:50 whether you’ll get there on time. Plus, there are worrying warning lights flashing on a vehicle that is proving far less reliable than you’d like right now. Worse still, you haven’t set off at all.
This is where quite a few insurers now find themselves with the deadline for IFRS 17 looming. Some are yet to begin preparations. Others might have set off some time ago but are now having doubts about whether they can comply in time as they look at what’s still left to do and all the roadblocks along the way.
Why is the journey often proving to be so difficult?
We’ve been involved in more than a hundred implementation projects. This experience shows that while some elements of IFRS 17 are reasonably straightforward, others can be deceptively complicated. As a result, around 90% of the ‘to do’ list tends to be completed quite quickly. This means that implementation teams can often assume that they’re cruising to the line with time to spare.
Yet, there is another 10% of the tasks that can end up taking more than half of the time and hence throw implementation plans wildly off track. Much of this niggly 10% is often left to the end of the programme, which means that the difficulties and resulting doubts about timelines are only now coming to light.
The complexities of reinsurance held, the requirements for which have only just been finalised, is one example of this last 10% of the development tasks that can lead to delays.
Similarly, the now allowed interim reporting or year end reporting locking in of assumptions accounting policy choice has led to programmes having to reconsider how best to accommodate this additional needed functionality.
The sensitivity analysis or the risk adjustment quantile required to meet the disclosure requirements is another area where the amount of flexibility allowed can often cause the greatest headaches when designing and building compliant systems and processes.
The underlying challenges include the amount of data and levels of integration needed, in particular between accounting and actuarial systems. Experience also highlights the risk of underestimating the time and effort needed to carry out dry runs and secure audit approval. This includes the documentation needed to help validate your model evaluations.
If you haven’t started, don’t worry. There is still time to comply - though you should get going as soon as possible as comparative figures are due at the beginning of 2022.
The options include an easy to implement one-stop-shop solution such as our award-winning IFRS 17 In A Box or managed service where we take care of everything for you. Fortunately, most of the main snags and hold-ups – the niggly 10% – have been identified on existing projects and addressed in these fast-track solutions. Both can also provide a useful backup or fallback option if your project is under way but you’re not sure that systems are currently fit for purpose or will be ready to go in time.
Whether or not you’ve started, it’s important to draw up a clear roadmap of all the tasks that need to be completed by when and the interdependencies between them – people, data and systems.
Ideally, this should look right to left so all the tasks are scheduled in – including the 10% – and left to right so you can track progress and clear any upcoming roadblocks. It can also be helpful to bring in a second pair of eyes to help judge whether plans are complete, as well as looking at which system choices are likely to be most viable for your particular needs and wider project ambitions.
The main message is don’t panic – you can get to your destination on time. But to do that, it’s important to look ahead to all the twists, turns and bumps on the road - and have a viable contingency plan if you’re not sure that your car can make it through.