In the rush to prepare for new regulation, it makes sense to start with one of the most important parts of the project: the people who will make it happen. With its fundamental requirement that finance and actuarial teams work more closely together, International Financial Reporting Standard (IFRS) 17 demands a particular focus on people – a significant cultural shift for many organizations. That’s why it’s so important you put together the right team and get started as soon as you can.
When it comes to drafting talent, we can learn important lessons about cost-effectiveness from mistakes European insurers made when tackling the Solvency II Framework Directive. As Actuary Info blogged in 2010: “It’s crazy… dozens of actuaries, IT professionals, finance experts, bookkeepers, accountants, risk managers, project and program managers, compliance officers and a lot of other semi-solvency ‘disaster tourists’ are being flown in to join budget-unlimited S-II Projects.”
As a regulatory sea change for the insurance industry, Solvency II commanded immense budgets that, in turn, attracted hordes of external contractors as well as multiple in-house IT initiatives. It’s fair to say that, in some cases, costs and scope spiraled out of control –largely due to poor coordination and management.
The lesson is that leadership and project management are key to best using your resources in times of regulatory change. Unless IFRS 17 is managed carefully from the beginning, it will be all too easy to follow the same mistaken idea that spending money equals making progress.
What’s more, for firms with disconnected finance and risk management functions, IFRS 17 will require a complete finance transformation. New working relationships and cross-team collaborations don’t happen overnight and will be challenging to establish without a strong facilitator, along with the buy-in and guiding hand of senior management.
Another lesson of Solvency II, not to mention basic economics, is that demand exceeding supply will cause prices to rise. For a large part of the implementation period, Solvency II saw demand for IT and actuarial resources far outstrip supply, pushing up costs for firms that were late to implement – and compromising the quality of available resources, solutions and results. Some markets with a limited talent pool are already facing the same problem with IFRS 17.
Taking all of this into account, we suggest that insurers start planning their approach to IFRS 17 immediately. It will be critical to engage management early and communicate a clear mandate for change. Strong project management also will be vital throughout, with robust budget controls and change management processes, along with early hiring of talent to fill any gaps in skills.
To mitigate some of the risks inherent in managing new regulation, we also recommend that insurers look to the expertise of technology providers, who can assist through a combination of specialist solutions and services. Leading insurance risk management systems will support the calculation aspects of IFRS 17 with, for example, regular actuarial library updates, governance, and information and data solutions. As well as dramatically reducing costs, total cost of ownership and time to market through automation, these solutions will free up whole teams to focus on the finer points of the regulation. They also come backed with a global skills base and consultancy support that can help resource IFRS 17 projects.
In other words, there are already answers to many of the challenges that IFRS 17 presents – so why reinvent the wheel by building costly in-house solutions, or wait to kick off your project? With the right technology in place, you can get a head start on regulation, and concentrate on putting the best possible team in place to lead, manage and support an IFRS 17 initiative. And you can do it well before demand outstrips supply.
Put people first – and technology to work – and the rest will follow.
Learn how FIS’ institutional and corporate solutions can help you increase your competitive edge.Contact us