IFRS 17, the new Insurance Contracts Standard, represents a complete overhaul of the accounting for insurance contracts, which will result in major changes for the industry.
Originally envisaged to come into place for annual reporting periods beginning on or after January 1, 2021, this date was deferred by two years with the new start date being January 1, 2023.
This means that insurers should prepare themselves for the implementation work in the lead up to 2023 as it’s likely to be long and complex.
But what is IFRS 17?
The aim of IFRS 17 is to standardise insurance accounting globally to improve comparability and increase transparency. It will also provide account users with the information they need to understand the insurer’s financial position, performance, risk exposure and comparability of their financial statements with other insurers.
This new International Financial Reporting Standard was issued by the International Accounting Standards Board in May 2017 and will replace IFRS 4 on accounting for insurance contracts.
The key objectives of this insurance legislation are to:
Introduce for the first time a single IFRS accounting model for all types of insurance contracts
Make the new accounting model highly transparent
Align as much as possible insurance accounting with the general IFRS accounting of other industries
Speaking about the changes, our senior actuarial consultant Adam Jones said,
“When IFRS 17 was first announced, the insurance sector threw a lot of time and resources into its planning and early execution. With the live date being pushed back a couple of years and other activities being prioritised, many insurers have left themselves a significant amount of work needed to standardise their actuarial and accounting systems, data and processes to be ready in time for January 1, 2023. The implications of not being prepared on time could amount to huge costs.”
So how can insurers prepare themselves in time?
IFRS 17 can be incorporated into your overarching strategy, meaning it doesn’t just need to be a compliant box ticking exercise. Whether it’s preparation for M&A activity, improving internal stakeholder measurements or reducing balance sheet volatility, IFRS 17 may be applied.
Accountants and actuaries need to collaborate to unify the approach and it’s a balance between being forward thinking and reviewing current and past data. This collaboration is vital to meet the new regulation.
IFRS 17 isn’t a “one size fits all” regulation. It differs from life insurance to general insurance and reinsurance. Understanding the best approach for the nature of your firm takes time. This includes considering your national/international reach, scrutiny from potential investors and the lines of business you operate in.
Granularity is key, which is why making sure your data systems and processes are updated is necessary. This may involve dedicating resources to changing your modelling software.
Don’t leave it too late…
If you’re in need of IFRS 17 expertise for your team to ensure your business is ready for the 2023 changeover, get in touch with our Insurance recruitment specialists.
Adam and Tom have extensive networks of proficient and knowledgeable professionals. Whether you’re looking to add long-term capability with a permanent hire or specific expertise on an interim basis, get in touch with our Actuarial team to discuss how we can support your needs.