Mind the Gap with a Dedicated IFRS 17 Subledger
Martin Sarjeant, head of risk solutions management and strategy, Insurance, FIS
May 24, 2019
In the drive to comply with IFRS 17, one of the biggest challenges that insurers face is meeting the differing requirements of both actuarial and finance teams. Imagine if one platform could address the contrasting requirements and priorities of both functions in equal measure.
As an accounting standard, IFRS 17 may at first seem the natural preserve of finance. But it also brings actuarial models into the heart of financial reporting for insurers – making the actuarial system the logical place to locate the standard’s additional, complex calculations.
That said, some aspects of any IFRS 17 solution clearly belong in the finance system. For example, insurers will need to post results under a revised chart of accounts and generate various accounting reports.
However, by posting IFRS 17 results straight to the general ledger, where the detail can easily get lost, finance loses the opportunity to drill down into their detail and analyze movements between reporting periods.
In other words, accountants would benefit from their very own place to post, store, report on and drill into IFRS 17 calculations and disclosures.
The good news is that such a place can exist. To bridge the great divide between the actuarial and finance systems, insurers have the opportunity to introduce a dedicated “thin” subledger, purely for IFRS 17 accounting and reporting.
While leaving the job of managing the calculations to the actuarial system and teams, the integrated subledger allows accountants to hold all the data on insurance contracts they may need for further analysis. At the same time, it enables actuarial teams to use a shared IFRS 17 solution for other business purposes.
As well as enabling accountants and actuaries to exchange consistent information, the ideal IFRS 17 solution must provide the view each function needs of the data. That means presenting complete results to both actuarial and finance teams, and meaningful business results to all stakeholders. It should also be possible to break the data down into the more granular credit and debit items required to populate a ledger.
Now, through a single platform with an integrated subledger, actuaries can review financial results early in the reporting process as well as apply the tools for other purposes such as pricing and business planning. Meanwhile, finance teams will be able to post journal entries that are directly generated from the actuarial results – and ultimately meet IFRS 17’s financial reporting and disclosure requirements.
Above all, this approach gives actuaries and finance professionals both the best-of-breed functionality and the coherent information they require to do their jobs. As a result, the functions can work more effectively together – closing the gap between them without invading each other’s space.