While the timing of the implementation of the standard has been well known, time is now of the essence. By on or after Jan. 1, 2022, insurers will have to have planned, executed and tested their ability to comply and begin reporting in parallel to the new standard. This is no quick exercise. Without careful consideration, planning and focused execution, insurers will quickly find themselves in non-compliance.
- Accounting – Accounting for IFRS 17 is not as simple as the debits and credits accounting for IFRS 4. It’s not sufficient to simply change where you record premium income and Expenses, but rather transformed in the way you do so. Developing detailed new accounting policies and a wholesale change in the chart of accounts is required, as well as calculations required to appropriately report within your new income statement going forward. Mapping those to the data requirements for the new standard is the baseline minimum change.
- Data – Data is at the heart of IFRS17. Ensuring comprehensive data quality, data controls, and data governance are all at the heart of a functioning IFRS17 compliance program. Data drives the IFRS 17 accounting engine, whether you’re required to calculate contractual service margin under the general measurement model (GMM) or the variable fee approach (VFA) or calculate the more simplified premium allocation approach (PAA). Either way, changes are needed in how you treat the data to calculate the required outputs.
- Reporting – Minimum compliance reporting requirements under IFRS 17 are well beyond what is required under IFRS 4. Generated data from your IFRS 17 accounting engine will feed the minimum reporting requirements. Limiting investment to minimum viable product may be suitable in the short term, but capitalizing on the rich data sets from IFRS 17 can transform an insurer’s business by providing deep customer and business insights to drive market penetration, retention, and profitability.
- IT Systems – Compliance cannot be achieved without substantial alignment of supporting IT systems to match new accounting policies, data accessibility, and data analytics/reporting requirements. For many insurers, this is the time to question the investment in upgrading legacy point-to-point systems using IFRS 17 as the mandate to upgrade to a data hub that captures all components of the requirement—allowing for alignment of the data flows for the end-to-end process.
- Actuarial – In many cases, actuarial models will need to be upgraded to be IFRS 17 compliant, adding new components and inputs, as well as providing updated outputs of your best estimated cash flows, containing new components such as risk adjustment. Alignment between actuals and expected at a granular level is something that IFRS 17 will rely on in order for your IFRS 17 accounting engine to work properly.
This article was originally published on: https://www.optimussbr.com/ifrs-17-the-race-to-the-finish-disruption-and-transformation-at-your-doorstep/