What's the best way to implement IFRS 17?
Set your ambitions at the outset and drive your work towards those outcomes
Experience has shown that transformation programs are more likely to succeed when there has been a clear and unambiguous view from the outset as to what the program is setting out to achieve.
- Implementing the changes that the new IFRS 17 rules require is a major regulatory-driven transformation. Insurers have a strategic choice to make in determining what their IFRS transformation programs should deliver. This is particularly critical against the significant investment for Solvency II that must be safeguarded and ideally leveraged to minimise the IFRS 17 implementation costs.
- The ambitions an insurer considers as it sets its implementation strategy could range from establishing a program aimed at securing compliance at minimum cost and disruption, to one that seeks to use the opportunity of this large-scale non-discretionary change programme as a catalyst for undertaking major business driven changes and securing wider benefits on top of securing full compliance in order to achieve competitive advantage.
- Whichever route is taken, it is imperative that the overall objectives, including the principles to be followed, are clearly articulated from the outset. This will help build cross-functional understanding and consensus around the change and contribute to articulate and evolve the ‘end-state’ vision as well as to create a ‘set of rules’ that can be used to guide decision making during the implementation journey.
When an insurer decides on its direction and strategy to implement IFRS Insurance there are a number of key factors to consider:
- Where does the implementation strategy position the insurer in relation to its peers?
- What is the insurer’s operational readiness starting point?
- To what extent has the reporting infrastructure just evolved to be compliant and deliver on a day to day basis the minimum requirements? Or
- Is the “as is” infrastructure at the start of the IFRS 17 implementation journey the result of a structured Target Operating Model approach?
- Is the Solvency II infrastructure “locked down” or does it still offer the opportunity to be adapted to deliver Strategic Synergy Benefits (SSBs)?
The experience of the Deloitte member firms on Solvency II implementation identified three broad routes which is expected to affect insurers’ choice of their implementation route for IFRS 17:
- A compliance approach which would broadly limit the change to existing processes and systems to those that are strictly necessary to deliver the new regulatory requirements. The key benefits would be to minimize implementation costs, maximize the use of Solvency II infrastructure and deliver compliance.
- A “compliance plus” approach that selectively identifies areas where additional implementation costs are justified to seize business benefits on top of delivering a fully compliant insurance enterprise.
- A market leader approach where the business strategy (e.g. finance transformation) absorbs the regulatory driven change to develop the optimal solution that allows the achievement of the desired Target Operating Model.