IFRS 17: key implementation challenges facing insurers

IFRS 17 is a landmark change to accounting requirements which will require (re)insurance companies to either customise, or overhaul, their current financial reporting processes and systems, actuarial models, financial statements and business planning (forecasting) models.

The key to an effective transition lies in early engagement from all stakeholders to facilitate a comprehensive project implementation plan and develop an early understanding of the key challenges impacting your organisation.

Our experience from working with both life and non-life clients has highlighted the following key challenges facing insurers:

Grouping of contracts
The enhanced contract grouping requirement under IFRS 17 imposes substantial challenges for (re)insurance companies in relation to their data processes, actuarial and financial models and management information. To understand the impact on your firm, you will need to review all of your existing contracts, their terms and conditions, and economic substance.

The valuation challenges faced by insurers will vary depending on the nature of their insurance liabilities, existing accounting, actuarial and reporting systems, models and processes. The ability to produce actuarial data with sufficient granularity is the key to a smooth transition to IFRS 17.

Process automation
The emphasis on audit and control under IFRS 17 makes it imperative to reduce manual actuarial, finance and risk management processes. Our industry experience suggests that to make IFRS 17 a success, insurers will need to incorporate an enterprise-wide workflow process automating the collation of data from multiple input systems, using a rules-based engine to carry out contract grouping and measurements and leveraging this information to produce both regulatory disclosures and management information.

Our Middle East assessment
Our experience in the UAE and the Middle East suggests that a substantial proportion of (re)insurers have not yet examined the gaps in data, systems and processes associated with introducing the new standard. It is imperative to conduct a gap and impact assessment early on in the process in order to identify key drivers underpinning the new target operating model. The lack of progress among smaller insurers in UAE and the GCC jurisdictions is an area for concern. These entities need to engage both strategically and operationally relatively soon to avoid condemning themselves to a future of manual work-arounds and patches that are unlikely to be sustainable, efficient or value-creating.

How can we help 
Our IFRS 17 team draws together risk & capital, actuarial, assurance, financial reporting and insurance industry experts to help you understand the particular challenges your business will face. For a free risks & opportunities meeting with one of our team to discuss how IFRS 17 will impact your business please contact the team here.


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