What are the organizational impacts of IFRS Insurance?
Reporting to the Market
IFRS has a dramatic impact across the organization. The Deloitte member firms use a four dimensional assessment to describe the impact of financial reporting changes on an insurance business. The dimensions are:
We look at the first dimension - Reporting to the Market and highlight the key impacts
- Insurance liabilities: the first set of IFRS rules on insurance liabilities introducing a transparent way to report insurers’ estimates of future cash flows and expected profits. This would move insurers from the current IFRS regime where grandfathering of inconsistent national practices has been hiding under the IFRS label.
- Financial assets: the key focus of the new rules is to respond to the financial crisis issues with fair value moving to a balance sheet role rather than playing a key role in the earnings of insurers. This shift is permitted because of the introduction of a more sophisticated and forward looking approach to impairment losses
- Consolidation, Revenues and Leases: not insurance specific but part of the overall re-writing of financial reporting rules and likely to hit insurers earlier (e.g. the new consolidation rules are effective from 1 January 2013)
Impact on external reporting:
- KPIs need to be reconsidered and a plan to move the market to potentially new ones is a very delicate matter involving all internal stakeholders and often done well over a sufficiently long period of time. The “wait and see” option may not be the most rewarding one.
Question: Is it a Technical Challenge?
Answer: Yes, but not only that. The implementation of a new financial language to measure business performance has pervasive ramifications across the operating model of an insurer