On November 17, the IASB approved IFRS 17 to be effective from January 1, 2021.
As change management specialists, we will be supporting organisations as they navigate and implement the biggest change the insurance industry has seen in a generation. Now is the right time for insurers to confirm their planning, and to help, our team have been looking at the key milestones and considerations.
As with any IFRS change, insurers will be required to produce comparative accounts. The IASB has made a major concession to insurers; they will only be required to produce three balance sheets and two income statements for their first set of IFRS 17 accounts. This means that comparative accounts will only be mandatory for 2020. However, investors may demand more.
Most insurers have commenced some work on the technical aspects of IFRS 17 or started engagement with external suppliers, but not mobilized full size delivery teams. We believe that IFRS 17 delivery work will have a noticeable impact on resource availability by September 2017. The number of people involved will climb steadily and peak in 2018 and 2019. Experienced resources are likely to be scarce and expensive during this period.
Insurers can choose to implement IFRS 17 early. Early adoption is unlikely to be beneficial to an insurer unless analysis of its new income and equity positions are favourable from an investor perspective. Early adoption of IFRS 9 and IFRS 15 would also be required. Alternatively it is possible they could, to some extent choose to deliver late, but only up to eleven months and at a heavy price: by changing their accounting reference period prior to January 2021. A costly exercise, it would require all manner of technical and back-office changes. It could also leave investors suspicious. Moreover it would not be allowed in jurisdictions where insurers have legally defined accounting periods.
We are uncertain when investors will start to take notice of IFRS 17. However, when they do, demand for information is likely to increase, adding burden to finance, actuarial and investor relations teams. We'll be watching closely.