An epic journey is reaching a milestone: Success factors for insurance accounting change

An epic journey: Insurers prepare for accounting change

Insurance accounting change has been a hot topic for over 20 years. The epic journey is now reaching a milestone with the International Accounting Standards Board (IASB) forthcoming insurance contract standard expected to become a reality in early 2017.

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The changes from the IASB's Insurance Contracts and Financial Instruments standards are likely to be wide-ranging and intricate, impacting all areas of an insurer's business including, accounting, actuarial, tax and reporting; data systems and processes; business management, such as appraising new products, designing distribution arrangements, evaluating M&A opportunities, buying reinsurance and/or managing invested assets. And, perhaps most importantly for a successful transition, insurers will need to consider how the changes will impact their people.

Key factors for success

Our experience shows us that there are many factors that will contribute to successful implementation, including:

  1. Dedicated staff: the single biggest factor contributing to program success is the presence of motivated staff dedicated to the project.
  2. Spend sufficient time and energy on the initial impact phase: this is a critical phase, allow sufficient time to perform a rigorous gap analysis on a line-by-line basis through the income statement and balance sheet and supporting disclosures. 
  3. Consider fundamental questions surrounding core business drivers: earnings trends, growth opportunities and target operating models. The earlier effects are identified, the more time you will have to develop and implement a strategic response to identifiy opportunities for your business.
  4. Staff training: design a comprehensive training strategy. 
  5. Robust project planning: create a plan that is realistic and achievable. Be prepared to make continuous refinements, and ensure formal tracking and monitoring.
  6. Clear communications: ensure there is a communication specialist on the team to develop and support formal and informal communications with multiple stakeholders throughout the life of the program.
  7. Careful change management: actively acknowledge and address organizational culture issues throughout the journey.  
  8. Think broadly: implementing the Insurance Contracts project and IFRS 9 will undoubtedly be a multi-disciplinary effort. Bring a holistic approach to the program.

Forward-thinking insurers are getting ready, are you?

In speaking with many of our clients around the world, we hear their concerns, but we also hear an industry getting ready for the epic journey to come.

“One thing that we were doing now is thinking about what the forthcoming standard will mean for the design of the products we are selling and those that are in development. Also, we are looking to understand how they might be affected and what we need to write into contracts now to future-proof them once the standard is finalized.” Graham Duff, Head of Business Partnering Insurance, AMP

“Continuous change has become second nature in the insurance industry. It requires a different way of working – being very clear about the changes required and about peoples’ roles and responsibilities in order to make those changes happen.”  Sandor Knol, Head of Finance and Actuarial, AEGON

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IFRS insurance contracts standard will have far reaching impacts for life and P&C insurers and reinsurers.

 
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Insurance

Our insurance practice comprise multi-disciplinary teams, led by senior partners with extensive experience.

 
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