Large insurers have stepped up their preparations for IFRS 17 and IFRS 9, but smaller insurers have fallen further behind in preparing, according to a new report, In it to win it, from KPMG International. Sixty-seven percent of large insurers (with premiums over US$10 billion) surveyed are in the design or implementation phase for IFRS 17, with almost as many, 64 percent, in a similar place with respect to IFRS 9. By comparison, among smaller insurers (with premiums under US$1 billion), only 10 and 25 percent have started design or implementation for IFRS 17 and IFRS 9, respectively.
However, even with the progress many insurers have made, major hurdles remain in making IFRS 17 and IFRS 9 operational. Ninety percent of insurers said they foresee difficulties in securing sufficient skilled people to do the job and half are worried about securing the necessary budget.
“Ironically, we are finding the organizations that are furthest along with their projects are feeling the greatest time pressure,” said Mary Trussell, Global Insurance Change Leader, KPMG International. “The more they do, the more they realize how challenging implementing the new standards will be. Whatever the outcome of requests for further deliberation of topics within IFRS 17, there is a huge amount to be done and no insurer can afford to slacken the pace of their implementation efforts. In the case of the smaller insurers who have done the least to prepare, they urgently need to engage and get started.”
With the numbers of people required for this complex work, securing sufficient talent is becoming an increasingly acute challenge. Nearly half, 45 percent, of the largest insurers already have teams of 50 or more and half of the mid-size insurers have up to 25 people assigned. Increased training is also a critical need, and the majority of insurers have so far delivered training only for members of their implementation teams.
Despite the challenges ahead, virtually all, 97 percent, of the largest insurers surveyed, view implementing the new IFRS standards as an opportunity to transform their business, with a focus on process optimization (identified by 77 percent), actuarial process enhancement (65 percent) and system modernization (58 percent).
“The costs of implementing IFRS 17 and IFRS 9 are very significant, but as our research demonstrates, the opportunities presented can be even greater,” said Laura Hay, Global Head of Insurance, KPMG International. “The new standards enable insurers to take a fresh look at their strategies and financial and actuarial processes. The transition can be a catalyst for innovation and to develop your talent and emerging business leaders.”
New operational challenges will come into focus as preparations advance. Only seven percent of insurers surveyed expect to be ready in time for two years of parallel running; more than half, 56 percent, anticipate just one year of parallel running before going live. Insurers are further along with IFRS 9 implementation, with about three-quarters planning to defer IFRS 9 implementation so it coordinates with IFRS 17.
“Ultimately, it is critical for insurers to be alert to evolving matters of interpretation so that the impacts on financial statements can be fully understood and there can be a dialog with investors about what changes they can expect,” added Hay.
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