Australian insurers and their overseas peers are running out of time to prepare for the transition to two new global accounting standards that will come into effect in 2021, KMPG says.

The accounting giant says in a new global report that only 7% of 160 insurance executives surveyed, including 16 from Australia, expect to be ready in time for two years of parallel running before International Financial Reporting Standard (IFRS) 17 and 9 come into operation.

IFRS 9 is an extensive review of accounting for financial instruments,with major changes involving recognition and measurement, impairment and hedge accounting. 

IFRS 17 was launched in May 2017 by the International Accounting Standards Board, and will have major implications for insurers. It makes extensive changes to the ways insurance contract liabilities are calculated, introduces a revised definition of revenue and imposes additional disclosure requirements.

IFRS 9 came into effect this year but insurers have the option to implement it in tandem with IFRS 17 in three years.

About 90% of the executives interviewed by KPMG foresee difficulties in hiring enough skilled staff to carry out the implementation, and 45% are concerned about budget funding.

 “As the full scale of the operational challenge becomes more apparent, many insurers are focusing on parallel running before IFRS 17 and IFRS 9 go live,” KPMG says.

“Many insurers are between a rock and hard place. They want to maximise the opportunities to dry-run the new bases of reporting, but are finding it challenging to have designed, configured and tested the systems that they need in order to achieve this.”