Heading Towards the IFRS 17 Quagmire?
FTI Consulting’s research suggests that, although insurance companies are making good progress with implementing the new accounting standard, they may be overlooking some opportunities for proactivity, particularly in terms of managing risk, accelerating technological upgrades and embedding effective communication strategies.
FTI Consulting’s in-depth research with C-level executives across the insurance sector suggests decent progress in implementing IFRS 17, with board members fully aware of the scale of the change and often directly involved in its implementation. However, in the following three areas it seems that best practice is not being universally followed. We advise insurers to address these shortcomings urgently in order to avoid errors seen in previous transformations, some of which had adverse effects on companies.
Risk management in the boardroom
We believe governance around risks of failure needs to be more ingrained in the implementation process. To address the risks inherent in an exercise of this size, firms should more deeply engage Chief Risk Officers (CROs) in their implementation programmes, alongside the other senior executives who are already involved.
Wider technology updates
Most insurers are using the implementation of the new standard as an opportunity to upgrade the finance function’s system and processes, compensating for past under-investment. However, we believe they should consider at the same time implementing wider technology changes (such as those underpinning data analytics) to achieve additional benefits in a cost-effective way.