Organizations constantly face numbers of new regulations, bringing both benefits and challenges to the way they do business. MiFID II and GDPR have been primary matters for companies in the last couple of years. As IFRS 17 is coming into force January 1st 2023, more changes will be required by insurance companies, leaving them approximately two years to prepare.
Issued by the International Accounting Standards Board (IASB) in May 2017, IFRS 17 is the new standard for accounting of insurance contracts. The goal is to increase transparency and to make it easier to compare insurance companies, since they are required to report specific information about the insurance contracts they issue and the reinsurance contracts they hold. The implementation of IFRS 17 will be a major challenge, fundamentally changing how insurers handle financial reporting. It will result in changes in existing accounting systems, actuarial calculation models and data flows.
Adoption to the standard will require early groundwork and significant planning to facilitate the shift. Here is a quick overview of how insurers should prepare for IFRS 17:
- Analyze what the changes mean for the company
- Comprehend the differences under all reporting requirements to have an overall view of the implication and effort required locally
- Finance, actuarial and IT functions need to work closely together
- Evaluate and test new systems and processes
- Have the right talent and skill sets on board for this transition
- Educate business users and investors
Due to the major impact on assets and results, insurers cannot wait until the last moment to make choices and set up new systems and processes. Finance professionals will also have to prepare themselves well, because they are already involved in the process of implementing IFRS 17. In addition, managers will have to think carefully about current personnel, and whether they have enough in-house expertise to meet the new legislation standard.
IFRS 17 is a global standard and will ultimately have a major impact on business. There will be no “one-size-fits-all” effect for insurers, but every insurer can be certain to see impacts on its reported numbers in one way or another.
Itello has an ongoing collaboration project with our customers within the framework of our standardization committee, with the aim to find consensus on a sustainable standard solution for the implementation of IFRS 17 in our market leading Policy Administration System Inca.
