Introduction

Depending on an insurer’s ultimate financial reporting operating model goals various solution options could be utilised to address IFRS 17 compliance requirements. Many insurers are considering developing an actuarial & accounting control tower from which to calculate, analyse, control and ultimately develop insights into the financial performance of the insurer from a statutory reporting perspective. We are seeing the need for such a function to comprise a team of both actuaries, accountants and reporting data and systems experts working together in sync to ensure compliance and on-time delivery.

 

IFRS 17

The International Accounting Standards Board has issued a new International Financial Reporting Standard called IFRS 17 that is set to replace IFRS 4 on the 1st January 2022. IFRS 17 focuses on accounting for insurance contracts and requires contract liabilities to be calculated as the present value of future insurance cash flows with a provision for risk.

Ultimately IFRS 17 changes the way that insurers operate their business and analysts interpret the performance of their business.

In order to comply with the requirements and more importantly operationalise IFRS 17 a fundamental change in processes and systems are required.

Key operational challenges

The end to end reporting cycle will change substantially, from sourcing data to publishing and disclosing results to the market. Key operational challenges include, among others:

  • Data sourcing and management from core administration systems through to reporting and business intelligence.
  • Change and integration of system architecture.
  • The level of collaboration required between actuarial and finance teams.
  • Ensuring a controlled environment focussed around data quality and alignment, systems architecture and business processes.

In addition, the Standard will have a key impact on the level of disclosures and the management of communications to analysts and stakeholders.

Build or Buy an IFRS 17 system solution?

Whether an insurer is looking to develop a bespoke, customised solution or buy an off-the-shelf, out of the box solution (or perhaps consider a blended approach) certain key design and technology capabilities are to be considered including:

  • A synchronised business and IT architecture approach between processes, data and technology.
  • An alignment of process design and business outcomes through an orchestrated workflow management solution.
  • Ensure alignment and ability for the solution to cope with current and future reporting metrics including, for example, regulatory metrics such as Solvency II.

In the next section, we will expand on some of the types of solutions available in the industry to meet the needs of the Standard. Whether an insurer follows an actuarial based approach that focusses on actuarial modelling and calculation; a financial solution focussing on the ledger or a more generic workflow-based approach or a combination of the three; the possibilities are endless.