IFRS 17 has the potential of creating greater transparency and comparability in financial reporting, lowering the cost of capital, and enhancing efficiency in the finance and actuarial functions. However, many insurers are still skeptical about the potential benefits, while forward-thinking insurers are planning to capitalize on these developments.

If implementation of IFRS 17 is to reach the best possible outcome for your organization, we believe that it needs to be seen as more than just a compliance exercise. The initial Assess phase is essential and executives should start by examining successes in previous large-scale projects to avoid past mistakes.

Based on a discussion with financial reporting executives at large insurance companies (Achmea of the Netherlands, Manulife of Canada, Munich Re in the US, and Royal London of the UK) and our professionals’ experience of working with insurers around the world, we have identified potential next steps and eight lessons for the future that should prove useful for insurers when planning for IFRS 17 implementation:

1. Success of a large project depends on good leadership – Leaders should stay involved in the project from beginning to end and be open to new ideas in the process.
2. Not just an actuarial, finance or compliance project – IFRS 17 is as much an IT and data management project. The analysis and design of the solutions need to be seen through all lenses.
3. One step at a time, test and learn – Do not design massive changes to systems and processes before knowing what the company is aiming to achieve at the end of the process step. It may be necessary to change direction after gaining insights of what needs to be done.
4. Prevent ‘scope creep’– A clear vision towards the business objective and rigorous project management is required to prevent the IFRS program to become so big that people lose sight of its objective.
5. Take enough time to prepare at the beginning – A comprehensive and detailed gap analysis is often the most critical project element to get right.
6. Develop ‘living’ plans for stakeholders’ communication and day-to-day operations – A blueprint for success includes realistic time-scales, clear accountabilities, and sufficient time to test and learn.
7. The change cannot be performed solely in spreadsheets – Spreadsheets are not enough to sustain a substantial change to a company’s primary reporting basis and might trigger operational, reputational and regulatory risks.
8. Changes in circumstances is inevitable – Given IFRS 17’s implementation timescale, personnel turnover is inevitable. Key decisions and working assumptions should be documented to maintain a consistent set of views, without becoming too rigid.

In the publication - Lessons for the future: Preparing for IFRS 17 - you will also find 12 questions that organizations should be asking to kick start their successful transition to the new standard.

We strongly recommend insurers examine their past large transformation projects to identify areas of success and pain points, and use these insights to guide their future course. Insurers should also consider how the company has embedded its current value reporting – whether it is Solvency II, economic capital, or embedded value – in its accounting framework. Can the company leverage existing valuation and reporting elements? If so, where does it need to change, redesign or upgrade its existing actuarial, finance and reporting structures?

Furthermore, companies should be conscious about the working assumptions and decisions made at the start of the project, then test and learn as they steer a course in as straight a line as possible over the following four years.

Find out more about tips and suggestions from the financial reporting executives, and contact your KPMG advisors to discuss how we can take a tailored approach to navigate your IFRS 17 implementation and consider the impact for your business.