IFRS

In November 2018, the IASB announced a proposed amendment to the IFRS 17 standard revising the effective date from 1st Jan 2021 to 1st Jan 2022. The proposed twelve month delay is based on case study and industry feedback to the IASB and allows insurers more time to assess and implement changes required to meet the IFRS 17 requirements as set out in the standard. As mentioned in ‘IFRS 17 implementation – What are insurers doing to prepare’ [Ref] amendments to the standard are expected to be confirmed later in 2019. IFRS 17 programme leadership are being thoughtful on how to adapt their programmes and optimise the programme's effort during this interim period to the IASB confirming any outlined changes to IFRS 17, whilst progressing with the current implementation plan.

From our experience, there are three possible responses to the now assumed delay:

  1. Maintain scope on the original timeframe: Carry on with current planned timelines, building in any IFRS 17 scope changes and holding the likely delay as contingency at the end of the programme timeline
  2. Maintain scope and extend timeframe: Extend the plans to reflect the revised effective date and use this time to run long and thin in the team whilst managing costs, with any potential IFRS 17 scope changes built into the plans and absorbed in the contingency
  3. Re-evaluate scope and extend timeframe: Extend the plans to reflect the revised effective date and use this time to re-evaluate options through a strategic and programmatic review. Leadership has time to consider options in advance, including any additional IFRS 17 scope changes and the impact to the business case and budget, and are able to baseline the implementation plan around these outcomes.

Very few in the industry are taking the first option outlined above. As such, we believe investing in a programmatic review will benefit the programme leadership team and allow them to select the appropriate response. We would suggest the review considers the assumption implications on the existing in-scope requirements and on previous scoping decisions made i.e. re-validating de-scoped requirements that had been eliminated due to being non-critical or time barred, and then reflects on additional scope and transition considerations which may also cover;

Programme ambition: Reconsideration of the ambition to achieve additional benefits outside of the requirements of the IFRS 17 standard, i.e. ‘IFRS 17 compliance plus’. For example, is there an opportunity to maintain the present IFRS 17 resources to realise other benefits to the finance or actuarial function. Retaining high quality IFRS 17 resources on the programme and diverting onto additional scope activities manages risk of re-resourcing in-demand skills and the costs associated.

Target operating model: Transition to a post IFRS 17 target operating model. The delay creates an opportunity to bring IFRS 17 milestone activity forward in implementing a post IFRS 17 target operating model, i.e. manage human capital requirements (resourcing, training, upskilling through centres of excellence and forums) and embed a culture of IFRS 17 knowledge into the organisation.

Technology and data: Underlying operating platforms will need to demonstrate stableness in a controlled environment during the dry run of the reported IFRS 17 data before ‘go-live’. Consideration on technology advancements and emerging results from industry ‘proof of concept’ case studies may present new information to the IFRS 17 programme on the assumptions applied around the tactical solution. Similarly, a review of the methodology of modelling before the ‘go-live’, specifically with respect to the reconciliation between IFRS 9 and IFRS 17, will build robustness around data quality requirements to meet IFRS 17.

Contingency planning: Revise the contingency basis for IFRS 17 delivery according to the additional scope decisions to be implemented into a revised IFRS 17 programme. A critical path assessment (left-to-right and right-to-left assessment) will qualify the validity of the revised implementation plan, and assist in identifying the risks associated with timing, plan progress and critical activity and, ultimately, contingency spend.

Investor relations and stakeholder management: Re-evaluate the benefit opportunity to scope in activities that build robustness around the financial communications system. Additional benefits could be realised through; bolstering stakeholder management, insight creation to accompany IFRS 17 results driven data (KPIs), quality standards around investors’ information and the markets’ reaction to the insurers’ agility to adapt to high impact programmes. Consideration may also extend to the insurers strategic appetite for early adoption of IFRS 17 and possible benefits arising, such as, a strengthened market position relative to competitors.

The graphic below gives an example high level critical path for an IFRS 17 programme implementation plan, reflecting the extension of ‘go-live’ to 1st Jan 2022;

IFRS 17 Preparing for a standard delay

IFRS 17 remains time critical, even with a potential twelve month effective date delay with the current IFRS 17 scope, and insurers should leverage the opportunity to; proactively assess any potential IFRS 17 changes to their programmes, and manage their response ahead of the IASBs confirmation. We believe insurers should be monitoring the developments closely around IFRS 17, particularly on the potential effective date and outlined scope changes, through the IASB and EFRAG boards meetings and include these developments in their programme review. By doing so, insurers will be able to; proactively navigate through the standards’ proposed modifications with agility, manage an appropriate response, and overall, strengthen the robustness around the delivery of the programme to meet the IFRS 17 requirements.

*The IASB, in May 2017, issued the IFRS standard on accounting for insurance contracts (IFRS 17) effective from 1st Jan 2021 that would be replacing the existing IFRS 4 standard.

 

Helen Evans - IFRS 17 UK Programme Management Lead

Helen is a partner in the UK Insurance Consulting practice. Helen has worked as a Programme Leadership Consultant for over fifteen years. She has worked in a variety of industries across a breadth of transformation themes from technology installations to large scale initiatives involving cultural and organisational change. Since 2007, Helen has focused on shaping, leading and delivering Insurance regulatory change programmes for our largest clients to deliver their most critical business outcomes. Her current focus is IFRS 17 and she is currently the programme director for one of our largest global IFRS 17 engagements.

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Anne Wilkinson

Anne  Wilkinson - Senior Manager, Consulting in United Kingdom

Anne is an organisation transformational consultant focusing on; finance, risk and regulatory transformation projects across banking and insurance.   With 15+yrs experience, she has worked internationally in the scoping and delivery of programmes (in-house and consulting capacity) in assisting clients to meet regulatory demands and produce cost efficiencies.   She has proven ability to influence in shaping strategy, whilst 'connecting the dots' for programme delivery and implementation.  Anne is a character with high energy: proven with good sporting physical achievements, strong mental ability (driver/ pioneer/ expressive) and an inclusive team player.

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