IFRS 17 Implementation Experience Sharing

Mao Dan March 2025

Photo: Getty Images

As reports have shown, insurance and other companies across Asia and globally have faced challenges implementing International Financial Reporting Standard 17 (IFRS 17).

In my experience with Sunshine Insurance Group, these are the keys to efficiently completing IFRS 17 implementation:

Strong support from senior management
Proactive resource allocation
Clear project positioning and objectives
Tailored system selection and implementation plan
Well-structured project organization
Effective time management and strong execution
Systematic training and knowledge transfer

This article is based on the 2024 Society of Actuaries (SOA) and China Association of Actuaries (CAA) professional development online training course “Life Insurance Companies IFRS 17 Implementation Experience Sharing.” It summarizes Sunshine Insurance Group’s IFRS 17 implementation experience and analyzes changes in performance indicators and their impact on insurance company management under new accounting standards. The hope is that it will serve as a source of reference for other companies.

Challenges Encountered During IFRS 17 Project Implementation

Shortage of required interdisciplinary talent. IFRS 17 is a new and complex set of standards, requiring professionals with expertise in finance, actuarial science and IT. Such talent is scarce, both within the company and in the market. Sunshine Insurance Group assembled a project team by drawing experienced professionals from various departments, participating either full- or part-time. Simultaneously, we actively coordinated with external consulting firms to leverage their expert resources for project consultation, technical guidance and training. Through efficient organization, extensive coordination and training, Sunshine Insurance Group formed a rigorous and efficient implementation team, laying a solid foundation for the project’s success.

The project timeline was tight, and the tasks were demanding. Initially, the project was planned in two phases. The first phase (June 2019 to May 2021) focused on interpreting the standards, conducting financial impact assessments and performing gap analyses. However, due to various internal and external factors, the first phase, originally scheduled for two years, was stalled for nearly a year and restarted in March 2021, overlapping with the second phase. After the project resumed, the team had to accelerate progress within a very short time frame, including reconducting research, completing system construction within just one year and reserving six months for parallel testing. Sunshine’s second phase implementation cycle was compressed by nearly half, leaving no room for error. Coupled with the inherent complexity of IFRS 17, the team faced immense challenges. Despite this, the team maintained focus and strong execution under the tight schedule and successfully completed the tasks.

Data quality and system integration posed challenges. Data quality and system integration are common challenges in project implementation. Sunshine Insurance Group, being a relatively young company, adopted the Accounting Standards Interpretation No.2 (China Version of IFRS4, issued in 2008) for most years, simplifying data collation. However, the new standards’ data dimensionality and granularity requirements are significantly higher than the old standards, requiring substantial time and effort for data tracing, verification and system upgrades. Under pressure, the Group team proceeded methodically, ensuring data accuracy and system stability through meticulous data cleaning and system integration.

Project management was complex. Sunshine Insurance Group’s subsidiaries have diverse business characteristics and operational focuses, leading to varied system selection requirements. This created pressure to meet the Group’s common needs and demanded high project management capabilities. The team overcame this challenge through enhanced communication, coordinating stakeholder interests, establishing a unified project schedule, and relying on the collaborative efforts and integration of all team members.

Key Factors for Efficient IFRS 17 Project Implementation

Strong management support and resource allocation. Full support from management and adequate resource guarantees are cornerstones of project success. Management’s attention can motivate the team, while flexible resource allocation ensures the project can quickly adjust direction and increase investment when facing difficulties. Resource input includes not only financial resources (e.g., external consulting fees, system procurement and modification costs) but also human resource allocation. Companies should budget sufficiently to address potential uncertainties and additional needs.

Regarding financial resources, the project’s broad scope, technical complexities, and long implementation cycle, covering external consulting fees, system procurement and modification and labor costs, could result in high overall budget expenditures.
Regarding human resources, Sunshine allocated approximately 50 full-time or part-time employees from actuarial, finance and IT departments to the project. Maintaining sufficient human resource support is essential for project success. In the initial stage, Sunshine ensured full commitment to key positions, subsequently adjusting staffing according to project progress.
Regarding external resources, including technical advisors, DSP services, and implementation consultants with extensive experience, was also crucial. These external resources shared best practices, mitigated project risks, helped the team avoid detours, and ensured timely and high-quality project completion. The role of external consulting support is particularly prominent under tight deadlines.

Clear project positioning and objectives. I think it’s best that the project has clear, specific and achievable objectives to avoid deviations due to ambiguity. When defining project positioning and objectives, internal and external constraints may be considered to ensure alignment with both external requirements (e.g., deadlines, standard implementation) and internal realities (e.g., staffing, budget, data status).

Regarding external constraints, the project would ideally be completed by a specific date. Implementing new accounting standards involves complex rules and procedures, increasing project complexity. Limited availability of experienced external consultants can also affect project progress and quality. Furthermore, unforeseen factors during system implementation require consideration and contingency planning.
Regarding internal constraints, the company’s human and financial resources are crucial considerations for defining project scope and objectives. The data status of existing systems (e.g., data quality, completeness, maturity) directly impacts implementation difficulty and required time. The project team would be best served to thoroughly analyze existing systems to assess the workload for data collation and transformation. Therefore, adopting a “prepare for the worst” strategy – anticipating and preparing for potential adverse conditions – might enhance the likelihood of project success and the ability to handle contingencies.

System selection and implementation plan tailored to company needs. Companies may actively engage in peer exchanges and research, leveraging the experience of industry pioneers. It would be ideal to understand the characteristics and advantages of consulting and system vendors and select the most suitable system and implementation plan based on specific needs.

Project organization. I believe an effective project organizational structure is crucial for project management, ensuring accountability and efficient project execution. For complex projects, a strong organizational structure is paramount. This is how Sunshine’s project organization was structured:

A steering committee responsible for project bidding, objective setting and major accounting policy decisions was developed.
A project management office responsible for overall project coordination, leveraging business units, IT, consultants and system implementation vendors was developed.
Subsidiaries responsible for specific implementation tasks were identified, with Sunshine finance and actuarial staff assigned to the project.
The implementation layer was divided by business lines (life, non-life, etc.), with each line having a project team led by its respective business leader.

This structure’s advantages are:

The CFO’s leadership ensures the strategic importance of the accounting system project and facilitates resource allocation, addressing resource shortages.
Involving personnel from all lines within the organizational structure clarifies responsibilities, ensuring comprehensive accountability. Each business leader is ultimately responsible for their respective project’s success. Group-level involvement promotes communication and coordination between business lines, enabling timely identification and resolution of common issues and enhancing project efficiency. Regular communication mechanisms, such as weekly and biweekly meetings, ensure timely information dissemination and problem-solving.

Effective time management and strong execution. Successful project implementation requires strict time management and efficient execution. The project management office is responsible for allocating tasks, setting clear objectives and priorities and ensuring that each workgroup implements their tasks. The team leader should balance the overall schedule, monitor progress and manage the issue log. Timely resource coordination helps ensure timely project advancement.

Senior management receives regular updates and holds ad hoc emergency meetings to ensure swift decision-making on actuarial, financial and investment matters. This flexible decision-making mechanism facilitates rapid responses to unforeseen project issues. Upon identifying an issue, the project team convenes (via weekly meetings or ad hoc meetings) to go over the issue log and find solutions, taking quick action to prevent delays.

Unexpected issues may arise during project execution. To ensure overall project success, flexible responses are encouraged, with critical issues prioritized. Minor issues can be temporarily shelved or addressed with alternative solutions. The priority is maintaining the overall schedule. If a particular component falls behind, immediate corrective measures should be taken to ensure on-time project completion.

Training and knowledge transfer: Training is crucial for project implementation, impacting not only team skill development but also project progress and ultimate success. Project participants, especially the business team, may receive continuous training throughout the project lifecycle. Due to the significant differences between the new and old standards and the substantial changes in business operations, training on fundamental principles and operational procedures is essential.

Initially, senior management may be trained on key standards and decision-making impacts to ensure informed decisions and avoid rework. At the same time, continuous team training could be emphasized. For the core team, specialized documentation, training and knowledge transfer could be implemented to ensure the team can independently manage the project, reducing reliance on external teams. Robust documentation and knowledge transfer processes ensure a smooth transition and continuity in case of team member changes.

Recommendations for IFRS 17 Project Implementation

The implementation of new accounting standards impacts various aspects of the enterprise. Besides the implementation challenges, companies could also adapt and optimize in areas such as reporting timeliness and performance indicator systems. Here are some analyses and recommendations for reference.

Optimizing monthly closing timeliness. A common issue raised when discussing IFRS 17 implementation experiences is the significant increase in reporting preparation time under the new standards, which often falls short of management’s expectations. Management typically desires timely financial results, but the new standards’ complexities and the need for interdepartmental coordination lead to delays.

In life insurance, calculating actuarial reserves depends on determining investment income and other financial data, creating a sequential process that increases time costs. In property and casualty insurance, many companies still need to prepare reports under the old standards before converting them to the new standards, potentially adding to the workload and complexity. Furthermore, the cumbersome interdepartmental coordination and analysis process hinders reporting timeliness. Feasible optimization directions include:

Optimizing the monthly closing process through automation and online tools to reduce manual intervention and improve efficiency.
Reviewing and optimizing data flow checks and rules to automate key data verification, ensuring data accuracy and timeliness.
Establishing a risk monitoring mechanism to track monthly closing progress in real-time, identify and address potential issues promptly, and ensure smooth reporting preparation.
Continuously adjusting and refining financial reports and operating analysis indicators based on management’s understanding of the new standards and their analytical needs to satisfy their decision-making requirements.

Changes in Performance Indicator Systems under New Accounting Standards and Their Impact on Insurance Company Management

In the initial stages of implementing new accounting standards, most companies and management teams still operate under the old framework, requiring a longer adaptation period to understand and apply the new standards. For example, the concept of revenue has changed significantly, requiring companies to reevaluate their understanding.

The relationship and comparison between new business value and contractual service margin are currently hot topics, requiring companies to weigh their pros and cons. Insurance service revenue is a new concept under the new standards, requiring companies to understand and establish corresponding evaluation systems.

The combined ratio is particularly important in property and casualty insurance, but its definition under the new standards is more complex, including adjustments for risk-free returns, impairment and non-claims expenses. Inconsistencies in definitions and methodologies across companies create challenges in comparison and interpretation.

Companies also face management challenges. For instance, different companies define and calculate the same indicator differently, hindering understanding and comparison. Under the new standards, the inclusion of investment fluctuations under the variable fee approach within contractual service margin and its amortization complicates the definition of operating profit.

In the future, companies may be best served to gradually adapt to the new accounting standards, and management teams will need to address inconsistencies in methodologies and rebuild performance analysis and decision-making systems based on the new standards. Companies also need to strengthen research and understanding of new concepts and indicators like insurance service revenue and contractual service margin to better guide operations, management and decision-making.

Regarding specific measures, under the new standards, the indicator of accumulated accounting profit shifts from residual margin to contractual service margin, and the fluctuations in net assets presents a new challenge. Management and actuarial/finance professionals need time to understand and become familiar with the new standards to build a new management framework.

Compared to the current solvency regime in China, where assets and liabilities are mismatched in their sensitivity to interest rate changes, the new standards use the same current interest rate curve for both assets and liabilities, facilitating more refined asset-liability management and interest rate risk assessment. However, this also increases the magnitude of instantaneous shocks because the impact of interest rate changes on liabilities is reflected immediately rather than gradually over time. While using the Other Comprehensive Income option can alleviate pressure on the income statement, it does not mitigate the impact of interest rate changes on net assets. If management overlooks this, they may underestimate the importance of asset-liability matching due to the lack of direct profit pressure, potentially causing significant damage to net assets.

The implementation of new accounting standards has far-reaching implications, requiring company-wide attention and resource allocation from top to bottom. Ensuring a smooth transition is the primary goal, but the subsequent work is equally demanding. After completing the initial reporting phase, substantial work remains, including unifying industry standards and refining regulatory policies.

These efforts require significant contributions from all stakeholders to ensure the smooth and effective implementation of the new standards. Implementing accounting standards is a complex and long-term process, requiring joint efforts from companies and regulators. Through comprehensive planning and consideration, the various implementation challenges can be gradually overcome, achieving stable development under the new standards.

Mao Dan, FSA, FCAA, is Chief Actuary of Sunshine Insurance Group. He is based in Beijing.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.