IFRS 17 compliance is slated to become mandatory starting from January 1, 2023. In many countries, this was postponed for one year from its original January 1, 2022 starting date. The reporting change intends to provide more transparency and standardization to allow results comparability across and beyond the insurance industry.
Following the International Accounting Standards Board (IASB)’s mandate, the local regulatory bodies have outlined their respective deadlines such as January 2023 in countries like Singapore and Malaysia. For other countries like Thailand, Taiwan, Philippines, the deadline is extended sometime between 2023 to 2024.
The one-year extension comes as a sigh of relief as many insurance companies face challenges in preparing their organizations for the IFRS 17 Compliance project.
But with the unprecedented COVID lockdowns we’re facing today, you might be asking: Can we bury this challenge under the carpet for a year? Or is it better to be proactive and take advantage of the extension to work on your project?
We suggest the latter. Let’s explore why it’s probably not a good idea to defer your project by a year
1. It was postponed for a reason.
The original date of effectivity was moved from January 1st, 2021 to 2022. It was extended once again to 2023 to provide ample time to address various factors such as:
- the complexity of the change
- the concerns of stakeholders
- the insurers’ readiness
If you don’t start working on these as early as you can, there’s a slim chance that you would be able to meet the implementation deadline.
Most insurers understand that the additional year is just enough to prepare and complete the necessary changes in process, data systems, and implementation. To many of our prospects across Malaysia and Asia-Pacific, this remains to be a positive discussion.
In our interactions with the Big4 Advisories across APAC, the singular message is to respond to "complexity of the IFRS 17 project and urgency to embark on the journey early".
A year will go by fast so give your organization more time to work on what needs to be done.
2. The current lockdowns are limiting organizational mobility.
Remote work is quickly becoming the norm as the uncertainties of the COVID-19 situation continue. Companies have fortified their systems and processes to prohibit such remote access/working – for security and other reasons.
Based on our experience with implementing IFRS 17, we saw that the implementation team typically consists of Actuaries, Finance, Accountants and IT teams, as well as product consultants.
Face to face meetings vs. remote requirement analysis/design workshops would take about 25 to 50% more time than normal as efficiency rates drop for many participants. That means failure to start now might cause serious delays later on.
3. It would take 18 to 24 months to implement the change.
Another trend we saw when we worked with insurers in Singapore and Malaysia is that it takes roughly 18 to 24 months to implement the relevant changes in Systems, Process, and final compliance reporting.
The new data collection process and the learning curve for business users would usually require one or two quarters of parallel run. Data from a year prior to the new format is also required for comparative purposes.
In short, the extension just leaves enough window to work on considering the requirement analysis, Design, Build, System test, User Acceptance test, parallel run, and going live stages.
4. Business as usual affairs won’t go away.
The members across departments who are qualified to work on the implementation also have to commit to their usual work routine. These people will still need to perform monthly and quarterly closing, financial and management reporting, and other small things on their plates. With these as additional limitations, you can only expect these people to allot seven to ten days in a month for this initiative.
5. There are more stones to turn during the implementation.
It is always a recommended best practice to engage an advisory to do a position paper, technical white paper, and gap analysis. However, the position paper usually is a guidance and not the silver bullet to cover all the specifications required to implement the project. There are more intricate decisions to consider such as the method to use for accrediting interest, weighted lock-in rate computation that can be taken off before the implementation process. This may take another three to eight months in design sessions. It’s time to get your compliance journey rolling, starting by looking at the ideal implementation partner. Consider these when selecting:
- Pre-packaged features with flexibility to configure specific needs
- Experience in Solvency, other financial reporting standards, and specifically in IFRS 17 projects
- Ability to extend the solution into more value-added areas such as management reporting and streamlining planning and budgeting processes
CCH Tagetik provides an IFRS reporting hub that includes data repository, calculation modeling, reporting, and disclosures in one easy-to-use solution. By choosing CCH Tagetik to meet your IFRS 17 compliance deadline, you can focus on your business with confidence without having to worry about compliance with regulatory standards.
For more information, visit CCH Tagetik IFRS 17 webpage.
