The clock is ticking for insurers to start assessing the impact of IFRS 17 and making it operational alongside IFRS 9.
With the publication of IFRS 17 on 18 May 2017, the clock began ticking for insurers to start assessing the impact of the standard and to make it operational alongside IFRS 9. But according to a new report, Navigating Change, from KPMG International, the vast majority of insurers are not far along in the process. Eighty-five percent surveyed say they are still assessing the impact of IFRS 17 or in some cases have not yet begun their assessment, while 65 percent say they are in a similar early stage with respect to IFRS 9. Further, 36 percent say their companies have yet to start any IFRS 17 or IFRS 9 project.
The research, conducted between 26 September and 16 October 2017, surveyed 82 executives from insurers in 20 countries including 15 of the 20 largest insurance groups in the Forbes 2017 Global 2000 that report using IFRS.
“The new standards are complex with broad operational implications, so it is understandable that insurers are taking time to assess the requirements very carefully,” said Mary Trussell, Global Insurance Change Leader, KPMG International. “But unless companies get started, they could end up challenged to design and implement process and systems changes by 2021.”
The vast majority of respondents are targeting readiness on or before 2021 to allow for the dry-running of new processes. Only five percent are planning for a local implementation date later than 2021 due to the expected timing of local adoption of the standard.
Having the right resources and skills to implement IFRS 17 and IFRS 9 represents a major hurdle for the insurers surveyed. Eight out of 10 respondents see securing enough people with the right skills as a significant challenge. As a result, all respondents plan to make use of external resources such as contractors and consultants. Moreover, six in 10 respondents say they are finding securing the necessary financial budget to be challenging.
“Insurers' concern with having sufficient skilled resources suggests that late starters face a double challenge, as they not only have more ground to make up, but also may have a smaller talent pool available to execute the new processes and systems,” said Laura Hay, Global Head of Insurance, KPMG International. “The transition will also require extensive training and cultural change to prepare and enable insurers' existing staff to understand and be prepared to report results of the business in what will be a new language.”
While implementing IFRS 17 and IFRS 9 poses complex challenges, two-thirds of insurers surveyed are keen to seize the opportunity to transform their business. Top opportunities identified include: systems modernization (47 percent), process optimization and actuarial transformation (45 percent each), and finance transformation (41 percent).
KPMG plans to continue surveying insurers at regular intervals to help them assess their readiness to meet the new requirements compared with their peers.
+1 908 313 5037
To develop a benchmark of approaches to the implementation of IFRS 17 and IFRS 9, a face -to-face and online survey of 82 executives from insurers around the world was conducted between 26 September and 16 October 2017. Fifty-two percent of responders are C-level executives. Sixty-two percent of responders work at Europe-based insurers, 28 percent are with ASPAC based companies, seven percent are headquartered in the Americas and two percent in Middle East and Africa. Plans are to repeat the survey in spring 2018 and regularly thereafter to follow insurers' journey to implementation.
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 152 countries and have more than 189,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.