To simplify implementation of international financial reporting standards for insurers, the International Accounting Standards Board (IASB) has tentatively decided to defer the application of IFRS 9, for financial instruments, until Jan. 1, 2022. It now comes into effect at the same time as IFRS 17, the standard for insurance contracts.
The application date of IFRS 17 was already deferred for one year as a result of pressure from insurers. At a meeting on April 9 in London, IASB members confirmed the amendments to IFRS 17, including its tentatively delayed application, Christophe Burckbuchler, Head of Insurance Strategy and IFRS 17 Solutions at Moody’s Analytics, told Insurance Journal. These changes will be presented in an Exposure Draft, he says.
“The IASB board also made the tentative decision to extend the temporary exemption of IFRS 9 for insurers so that both IFRS 9 and IFRS 17 can be applied at the same time,” Burckbuchler said. An IFRS specialist based in Toronto, Burckbuchler welcomes these decisions “because they give insurers the clarity they need to move forward with IFRS 17 implementation.”
No rush to adopt IFRS 17
The IASB has not seen early adopters of IFRS 17, Burckbuchler points out, adding that he is working closely to support his clients’ IFRS implementation projects. “Our observations thus far indicate that there are a number of insurers who started early on their IFRS 17 journey. These firms have already spent a lot of time understanding the standard and its technical, functional, and operational impacts, and they will be well positioned for the implementation deadline,” he explains.
Speeding up implementation despite time and complexity challenges
Burckbuchler suggests that many challenges explain the lengthy work on the IFRS 17 project. “Insurers need to bring together various skills and capabilities in a relatively short time frame, and may have to accelerate implementation to meet the deadline.” He observes that some insurers are further ahead with implementation than others. “Some insurers are very advanced, some are still in gap analysis, and some haven’t really started,” he says.
Another major challenge: complexity of implementation. It notably depends on the size of the insurer, Burckbuchler continues. “The larger the company, the greater the complexity. Large multinational insurers with subsidiaries in different regions have to deal with the lack of homogeneity of different systems,” he points out. “As IFRS 17 seeks harmonization, insurers will need to manage many systems across the business.”
The major challenge will be to ensure that representatives of different functions move forward with a shared viewpoint, he explains. “IFRS 17 brings people from different functions together: actuarial, accounting, finance, and technology. IFRS 17 is breaking the silos and requires a lot of coordination. Accountants need to understand actuaries, and actuaries need to understand accountants,” Burckbuchler says. He says insurers will need a solution that provides an accounting and actuarial environment in one place.