Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Top Stories

Plotting the route to IFRS17 compliance

Plotting the route to IFRS17 compliance

Henri Wajsblat, Head of Financial Services Solutions, Anaplan

The International Financial Reporting Standard 17 standard (IFRS17) is not just another regulation – it will fundamentally change the way that insurers can and will operate around the world.

At its core, IFRS17 will create an international, uniform view of insurers’ reporting of financial statements. Where previously each regional market disclosed these figures in its own way, regulators will now be able to compare the outputs of an insurance company in UK or Australia for example, with any other insurer in the world. A harmonised system, but one that comes at a cost to insurance companies – the long journey to compliance. This will be a complex compliance quest to the deadline date. Managing this through a connected planning approach will be key to success.

The regulation

While the implementation date of IFRS17 is 1st January 2021, the journey to compliance will be a long one and businesses need to get moving now. It represents a systemic change in the valuation of insurance contracts – impacting insurers and reinsurers alike. It will require a significant overhaul of financial and actuarial systems, processes, accounting and disclosure policies. IFRS17 compliance has quickly become a high business priority. The ripple effects of which will be felt right throughout the finance value chain: from finance calculations to accounting, costing, planning, forecasting and reporting.

Given the scale and complexity of the changes required, the countdown clock to 2021 is ticking loudly in the halls of insurance firms around the world. Finance and actuary functions will need to collaborate much more closely to map their journey to compliance under the new IFRS17 standard and assess the architecture gaps within the IT infrastructure.

The tech-patch trap

To deliver on the transparency and reporting requirements of IFRS17, insurers will have to generate and process much higher volumes of data – and indeed improve the quality of that data. There will need to be a complete shift in the way that information is collected, stored and analysed. For example, finance, actuarial and risk management IT architectures used today are often siloed and rely on legacy tools that are not flexible enough to handle the detailed requirements of IFRS17. The temptation then is to just attempt to patch up the existing separate solutions. Like putting a band-aid on a leaky waterpipe, it may seem like a simple and cost-effective answer at first, but over time, it may prove incredibly costly and risky. The siloes make for very manually intensive (and error prone) data management, trying to trace the reported figures back to the calculation models and assumptions that produced them.

That deals with the present, but IFRS17 also makes demands on the future. It introduces the concept of a forward-looking view on the finance data. Cash-flow modelling and forecasting, consistency of planning and forecasting models with the new external reporting framework, ability to simulate the impact of a new product or a change in pricing on the IFRS17 financial statements: these all become key functionality requirements for technology under the new regulation. Trying to achieve that with an existing set of siloed solutions is a challenge that  insurers do not even want to contemplate.

The road to the platform

So, what’s on the checklist for this journey to 2021? By the deadline, insurers should have addressed technology solution requirements for Contract Service Margin calculations, IFRS17 compliant accounting systems, IFRS17 cost allocations, adapted planning, forecasting and management information to the new IFRS17 KPIs, and IFRS17 reporting and disclosures. While implementing all these various layers of functionality, they will have to run sensitivity analyses and simulations, scenario modelling and IFRS17 impact assessments of any material changes in their business.

Mapping your way to data nirvana

The very act of complying with this new regulation will force insurers to assemble and orchestrate huge amounts of data from a variety of source systems. But this bi-product of compliance will be a hugely valuable resource and insurers could turn a compliance expense into a business return on investment – if they adopt a unified data platform to tackle IFRS17.

It’s this joining of the dots that will give insurers a clearer view of their insurance contracts’ performance. That connected planning approach enables them to gather data from various functions and view in a single platform for planning and forecasting. It eliminates silos across the organisation and eases data reconciliations – so the business can have confidence in these projections. But it will also enhance the comparability of the financial reporting and help insurers benchmark themselves against the best in the world. They can comply and get insight into how they can perform and operate better.

Tony Trewhella, a consulting partner at Deloitte summed the situation up perfectly: “I think that insurers should start as soon as possible to run their initial PAA/BBA assessments, and they should also be, as part of the assessment, looking at a unified data platform to support the large volume of data required to support the regulatory requirements. In the past the level of detail required for IFRS17 was locked up within sub-ledgers and contract systems, and nobody could really get to it for insight purposes. Now that they’re forced to unify that information, they can put layers of analytics on top of it and can start to really be an insight driven organisation.”

Today’s reliance on heavily-manual processes and legacy systems within the finance function has to change. The demands from IFRS17 simply make it impossible to keep going down this path. Insurers will need to look towards collaborative and open platform solutions that can mine and orchestrate the data from across the business, support the implementation of the core reporting requirements and be agile enough to respond to scenario modelling and the what-if analyses required during the transition period. It’s not going to be easy. But it’s a difficult journey worth taking.

Global Banking & Finance Review


Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!

By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review │ Banking │ Finance │ Technology. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post