IFRS 17: the insurance contracts standard

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All insurance companies reporting under IFRS will be impacted by the new reporting standard when it becomes effective in January 2021. IFRS 17 will result in significant changes to the way that financial information is presented, and adoption will require significant planning.

IFRS 17 presents opportunities to harness data more effectively, to improve the structure of your finance function and to better inform your decision making.

Ultimately IFRS 17 is about what story you want to tell about your company… and if you really grab the opportunities that implementing the standard presents, imagine the sort of business you could be running in 2021.

Latest insight

IFRS 17 and reinsurance

Expert guidance on considerations for reinsurance in IFRS 17 implementation planning.

The application of IFRS 17 to reinsurance has the potential to make a significant impact on your balance sheet.

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About IFRS 17

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 and 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.

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The impacts

  • 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.

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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.

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Next steps

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.

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Four step model

Helping you plan and understand how you can use IFRS 17 outputs to better inform your decision making.

Impact assessment

Conduct a holistic assessment of the  operational, financial and reporting  impact of IFRS 17 on your insurance  business. Develop a roadmap  towards implementation,  highlighting the options available  and the associated costs.

Technical analysis and ongoing evaluation

Technical interpretation, guidance  and consideration of practical  interpretation options. This may also  include modelling the impact of  options. This modelling can also help  evaluate the impact on product design,  business plans and dividends cover.

Education and training

Conduct a thorough analysis of the  education and training needs across  the various competency areas.

Deliver a training programme across  the organisation which spans the  breadth of requirements but is  customised and fit for purpose for  each area.

Taxation

Assess the impact on cash tax, tax  process and tax reporting. Develop  and implement tax approach  including assessment of financial  implications, consideration of  potential changes to tax law and  integration of the tax workstream  into the wider project.

Helping you design the best target operating model, systems and controls to produce IFRS 17 financials and tell your company’s story.

Helping you build and test your internal systems and processes to make the most of your investment.

Supporting a dry run to create comparative financial statements, iron out any issues and enable a smooth transition into business as usual.

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Transition

Managing the process of creating your opening balance sheet under IFRS 17, using existing data in the most effective way.

Insights

Contact us

Alex Bertolotti
Global and UK IFRS 17 Lead, PwC United Kingdom
Tel: +44 (0)7525 298 694
Email

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