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IFRS 17 is Postponed. Here’s Why You Shouldn’t Delay Your Compliance Plans

Jul. 20 2020 by Grazia Cafagna, Director - Financial Services Solutions Management - CCH Tagetik

Performance Management Reporting & Compliance

Amidst a whirlwind of chaos, anxiety, and uncertainty caused by COVID-19, insurers were granted a regulatory respite: IFRS 17’s go-live date has been deferred to January 1st, 2023 for companies with annual reporting periods. But that doesn’t mean you should stall IFRS 17 compliance initiatives. It means quite the opposite: the time to get-going is now.

Changing Circumstances: Amendments and COVID-19

While the delay might have initially gifted insurers a sigh of relief, this grace is not without conditions. The latest — mostly confirmed — amendments proposed in the June 2019 Exposure Draft are extensive and have significant impacts to the IFRS 17 compliance processes many companies have already started putting in place. (The final version of IFRS 17 has been release on July 10th.)

What’s more, just as timetables, plans, and business models pivot to survive the global pandemic, insurers’ IFRS 17 compliance efforts will not be spared. As EY outlines,

“IT upgrades may be needed to support increased home-working. Restrictions on face-to-face meetings may affect access to vendors and suppliers. If companies’ profitability is damaged, there could be increased pressure to cut costs and tighten IFRS implementation budgets. It’s therefore vital that insurers adopt agile project techniques, progressing implementation projects on a ‘no regrets’ basis.”

To adjust to these changing circumstances, companies should take a hard look at their IFRS 17 implementation plans from end-to-end. The amendments’ impacts and COVID-19 challenges will require reassessments of software system design, implementation programs, compliance milestones, accounting policies, and systems testing, all of which might already be set up.

The Urgency to Continue Compliance Efforts Continues

On its face, the delay has granted insurers with an extra year to adjust their systems. But, in digging deeper, many companies might find that the added year is only just enough time. Pre-pandemic, our in-house IFRS 17 experts found that:

  • The average migration path from IFRS 4 to IFRS 17 takes 18-24 months, as significant time in needed to review and assess data.
  • Gaps in data sources can significantly increase the time it takes to get up and running.
  • Data gaps can cause a lot of assumptions which may or may not be correct. Thus, there is a lot of uncertainly in parallel systems.

While we have no hard evidence yet on how the pandemic will affect timelines, we can assume that, given the current situation, implementation and compliance timelines will be even longer than previously experienced by our implementation team.

Pandemic withstanding, it’s important to remember that IFRS 17’s impacts are widespread. They’ll affect corporate functions, systems integration, and data flow from corporate functions that span across finance, treasury, risk management, IT, operations, and actuarial services. What’s more, the full retrospective approach requires companies to organize historical data that spans from the start of contracts — potentially dating back to the 1980s — until the IFRS 17 effective date. And new systems, like a CSM (Contractual Service Margin) engine and accounting hub, will alter the reporting value chain. Of all challenges, data mastery will be the biggest. The standard requires companies to have best-in-class data management when it comes to the availability of data, data quality, data governance and the ability to handle large volumes of financial, non-financial, real-time, and historical data.

Our Advice?

Stay your course. Chances are, you’ll have to use all the time you can get. Keeping your IFRS 17 compliance initiative moving will pay dividends in sanity, accuracy, and troubleshooting later. Given the great challenges with IFRS 17, an extra year of implementation time will allow you to:

  • Plan the implementation in greater detail, nailing down data sources and data flows
  • Improve data quality by gathering all historical data needed for the transition
  • Prepare test cases, execute simulations, and perform trial runs to ensure accuracy when it comes time to submit disclosures
  • Streamline processes for consolidation, planning, financial and management reporting for a greater efficiency

With extra time to carefully plan, prepare data, assess your systems, and on-board team members, you can use the extra year to improve the quality and efficiency of your IFRS 17 implementation.

To learn more about CCH Tagetik IFRS 17, download the whitepaper "Are You Ready for IFRS 17?" here!

IFRS 17

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