Mirror, sign, manoeuvre – An IFRS 17 supply perspective

To maximise the chance IFRS 17 presents, insurers want to make use of a transparent enterprise lens to look ahead at how they wish to function underneath the brand new normal. Right here’s how…

 

“One’s vacation spot isn't a spot, however a brand new approach of seeing issues.”
― Henry Miller

It's effectively documented that IFRS 17 has been over 20 years within the making. It brings with it a big change in the way in which insurers account for contracts. From an accounting and enterprise perspective, it’s a brand new approach of seeing issues.

Examine your rear-view mirror

Lots of expertise and enterprise experience can be centered on attaining IFRS 17 compliance and outcomes. The top-to-end affect of this normal is wider-ranging than merely updating monetary statements and disclosures. So, is IFRS 17 identical to structuring any huge programme? For my part, organisations ought to draw on their expertise of earlier data-centric programmes comparable to Solvency II or GDPR. Insurers want to take a look at their programmes with a transparent enterprise lens to look ahead at how they wish to function underneath IFRS 17.

Wanting ahead and navigating by the bumps within the highway

IFRS 17 signifies that leaders might want to take a look at their enterprise by a brand new lens of profitability and in addition think about the related operational impacts. They might want to ask themselves:

How will my enterprise, buyers and market reply to altering measures of profitability?
Will IFRS 17 set off broader business transformation to boost competitiveness, and the way does this align with my strategic plan?
Ought to I repair, amend or rework? The highway forward will reveal complexity throughout full end-to-end finance and actuarial processes.
How can I take advantage of this chance to drive incremental advantages throughout this lengthy journey and maximise my funding and enterprise case?

Overhauling insurers’ monetary statements and disclosures won't be a easy journey. There can be bumps to navigate and detours to take in an effort to adjust to IFRS 17. On this collection of blogs I'll tackle these questions and draw upon my group’s supply expertise in supporting a variety of insurers. To assist your IFRS 17 journey I’ll give attention to quite a lot of key resolution factors and resultant challenges, and discover how the selections and supply method of IFRS 17 programme leaders may help bridge them.

Wanting left and proper

So the place, by now, ought to insurers be on their journey? Most, if not all, could have undertaken excessive degree affect assessments. It’s additionally seemingly that their understanding of the affect on the goal answer structure could have thought of the next:

What knowledge do we want?
Is our structure match for goal?
Lets replace, construct or purchase?
Can we use this as a possibility to remodel?
How can we obtain advantages past mere compliance?

And, most significantly, do now we have the time to realize these ambitions?

What number of miles do you've got left on the clock? Time to go to the showroom?

There are robust arguments to make use of IFRS 17 as a catalyst to remodel, significantly to strategically enhance the general administration of information and analytics. However this can be constrained by each funding and schedule restrictions. That stated, the IASB’s resolution to increase the compliance deadline to January 2022 would possibly now present further alternative to remodel and drive extra substantial advantages than simply turning into compliant. I believe it additionally offers insurers extra time to deal with the cultural and enterprise implications of IFRS 17.

While the IFRS 17 ‘transition’ interval may appear a good distance off, this needs to be entrance and centre of challenge leaders’ pondering when planning their supply roadmap, their method to structuring releases and their method to knowledge migration. They should hold line of sight of those goals by every key design resolution. They usually’ll want to keep up integrity throughout the chosen answer to fulfill compliance and finance and enterprise strategic goals.

Elevate up your bonnet – knowledge is central to informing your journey and efficiency

Attaining knowledge compliance is on the coronary heart of IFRS 17 change. A excessive degree affect evaluation ought to have already got recognized that knowledge granularity will enhance in parallel with related knowledge volumes. There are compelling causes to develop a ‘fact-base’ of information and analytics to assist key design choices and to supply stakeholders, each inside and exterior, with early perception into how modifications will affect the organisation.

Insurers might want to resolve which technique and calculation mannequin can be utilized to every line of enterprise. This not solely must be completed as a one-off train inside the change programme, but additionally re-visited for every accounting interval. Information, methods and reporting processes ought to allow this and supply sufficient administration data and analytics to assist choices in an auditable method. Throughout Solvency II, a number of insurers significantly underestimated the complexity of their organisation’s knowledge construction. Consequently, many are nonetheless resolving knowledge high quality points and sustaining cumbersome knowledge and methods structure which can require revisiting. This is only one instance of the place IFRS 17 can be utilized to evolve the information panorama to profit the broader enterprise.

Don’t simply take your passengers for a experience … contain them within the journey

To keep away from re-work by misunderstanding or misinterpretation on a programme, it’s actually vital to have everybody perceive the challenge’s targets, to speak clear enterprise outcomes and to de-mystify technical jargon. As with all requirement and subsequent translation into system construct, configuration and related course of implementation, there must be a transparent alternative for enterprise customers to check and settle for the change. By means of transition, ‘anticipated’ vs ‘precise’ outcomes may differ. This opens up questions on how necessities have been met. There can be bumps and potholes within the highway, however they are often averted up-front by cautious planning.

“It's good to have an finish to journey towards; however it's the journey that issues, ultimately.”
― Ernest Hemmingway

As with all programme, sponsors and supply groups count on predictability, clear threat identification and administration of on-time supply to finances. As insurers’ IFRS 17 journeys evolve, there can be alternatives to weave in further advantages, however these needs to be managed correctly through change requests, profit realisation and possession.

In my subsequent weblog I'll take a deep dive into knowledge: the necessities, challenges and alternative.