Why is it an issue?
- The new standard replaces IFRS 4 on accounting for insurance contracts and has an effective date of 1 January 2021.
- IFRS 17 is the biggest shake up of insurance reporting for decades, impacting all insurers reporting under IFRS. This will result in significant changes to financial reporting systems and processes.
- IFRS 17 will bring more consistency & transparency across the insurance sector.
- Insurance companies need to decide what story they want to tell about their company, how they want to structure their finance function, how they want to use data more effectively and how to use IFRS 17 to better inform decision making.
- For an industry only just recovering from implementing Solvency II and being the subject of other regulatory capital regimes there will be significant potential disruption to existing reporting of results.
- New systems, data and processes are likely to be the main operational challenges and cost drivers.
- Preparing for the new complexity of IFRS 17 within the required timeframe will be a challenge for many insurers.
- Actuarial models, financial reporting systems, taxation, balance sheets & income statements, key performance indicators and potentially even executive remuneration will be affected by IFRS 17.
What should you consider?
- The requirements of IFRS 17 – assess the impact on your business, analyse the options, understand the implications, educate your senior management team and train staff.
- The options and how to design your target operating model, systems, controls and processes.
- How to make the change to the new reporting basis – collecting historical data, moving to new systems, shift to new reporting and KPIs.
- What resources you’ll need to implement the systems, controls, processes, organisational design, data, budget, people and infrastructure.
Companies are at varying stages of readiness for IFRS 17 adoption. The time has come to translate theory into practice. Key questions to consider:
- Do you have a complete project plan? Have you factored this into your budget?
- Have you secured the resources to deliver the plan?
Above all, make sure you plan early to give yourself the best chance of implementing IFRS 17 successfully and as cost effectively as possible – first time.