Standardisation across the finance, accounting and insurance sectors has always been an ongoing and evolving process. With the increasing operational reach of multinational firms, this evolution has gained momentum, giving rise to the need for reporting standards that can streamline data in terms of collection, presentation and archiving. A recent, more talked-about standardisation has been in the insurance sector with the International Accounting Standards Board (IASB) announcing the IFRS-17 reporting standards.
What is IFRS 17?
IFRS-17 is a standard method of measuring, disclosing and presenting of insurance contracts that has evolved from IFRS-4 and addresses the lack of comparability in its predecessor. IFRS-17 has key underlying principles that impact the identification of insurance contracts and recognises the profit over the period of the service contract and combines it with the current measurement of future cash flows. It also separates the insurance finance expense and income from the insurance service results and sets the presentation method for the same.
Who does IFRS 17 impact and when does it take effect?
The standardised accounting model for all insurance contracts will impact around 450 listed insurers with US$13trillion worth of assets using IFRS standards. Introduced in May 2017, aimed at ensuring the transparent and useful presentation of contract information and the resultant profitability, the IASB has given three-and-a-half years to the companies to implement the new requirements before it becomes mandatory by January 1, 2021. (IFRS Fact Sheet) Companies with a global footprint will be required to adhere to both, the GAAP standard in the US and IFRS 17. https://www.tcs.com/evaluating-the-impact-of-ifrs17-on-insurers
How does IFRS 17 impact the jobs market?
With three-and-a-half years to implement the necessary changes and compliance for the adoption of IFRS-17 standards insurers are required to act promptly. Although IFRS-17 will impact life and non-life insurers to varying degrees, both will have to undergo a series of complex changes to be compliant to the new standard, which means they will have to take stock of the skills required to bring about the overhaul.
So, what are the areas where a firm would need to revisit their talent pool?
Life insurers will witness more complicated changes owing to the longer duration of its contracts. This will mean greater in-depth sector knowledge, as well as the attention to detail required to assess the nuances of a long-term contract, compared to non-life insurers. A professional with extensive knowledge from a specific area of the insurance sector will be in a better position to tackle any challenges that may occur in the transition phase and can save valuable time and effort for the organisation.
Technical Skills Required
A large-scale implementation of standards like the IFRS 17 requires seasoned professionals who can look at the larger picture by analysing the organisation-wide impact of the transformation. This includes mid-level insurance professionals with strong experience of the domain and the local regulatory frameworks, guided by strong leadership at the helm of the transformation who can envision KPI’s, statistical analysis, financial modelling along with the overall impact on the daily functioning of the organisation.
The scale of implementation can be daunting especially when it must be undertaken across geographic locations. This means there will be different teams who have different work ethics and cultural differences. The leadership team in such situations should possess the required soft skills along with technical know-how to efficiently manage and navigate through the bottlenecks arising out of these complexities. Refined stakeholder management skills are of paramount importance as the changes and progress have to be periodically communicated to the business.
With the advancements in financial and regulatory technology, large scale implementations like the IFRS-17 can be undertaken with a high level of automation and efficiency. Processes like data collection, income and interest calculations and actuarial forecast can be automated by developing secure in-house software applications. Large organisations will be looking at strong technologist who can come on-board to execute this development project securely and undertake ongoing upgrades. The introduction of AI has also enabled insurers to continually study purchase patterns in an automated manner to determine what type of products are mutually beneficial to the customers and the firm.
Inevitably new regulation that brings about changes will also have an effect on individuals looking at moving into a new role and IFRS 17 is no different. However, if you are somebody who is willing to embrace change and is adaptable then you can take advantage. But you need to make sure you have the right fit within an organisation from your own perspective as well as that of the employer. That is where working with an established executive search business can be vital. Not only can a good executive search business provide guidance on company and culture fit, but also help you with plotting out your career path based on ensuring you get the right level of technical skills you need to find that next role. If you would like to find out about the skills required to secure a job in the IFRS space, please get in touch with Andrew Tsang to have a confidential and detailed conversation.