FIS Blog

Will IFRS 17 Be A Shock To Your System?

Martin Sarjeant | Monday, November 7, 2016

When it comes into force in the early 2020s, IFRS 17 will place new demands on insurers – especially in regions that are yet to experience Solvency II or equivalent levels of regulation. And most under pressure will be firms with legacy, poorly integrated actuarial solutions. So, given the planning and considerations involved, it could be high time to set an upgrade in motion.

A surprisingly high proportion of insurance companies still use actuarial systems that are two decades old or more. They may have got by until now, but a jumble of antiquated solutions held together by “band aids” and in-house “glue” will lack the control and cohesion that the coming accountancy standard is set to require.

The good news is that risk management software vendors never stand still and have embraced wider developments in digital technology to re-engineer their platforms to a new, enterprise-ready level. The word “enterprise” can be overused, but in this context reflects the fact that insurers’ risk solutions should no longer be individual desktop platforms managed by actuarial teams themselves.

Today, actuarial systems are critical to businesses as a whole and should be used to underpin strategic decision-making, not simply as a risk reporting system for regulators. To get the most value out of these risk management tools, insurers need to make sure they are embedded across their organization and controlled centrally by a qualified IT team.

To support this kind of enterprise approach to risk management, and be ready for IFRS 17, you’ll need a system with the following attributes.

  • Connectivity – The production of IFRS 17 numbers will rely on actuarial systems to make the calculations and accountancy systems to consume and report the resulting data. This in turn requires the two systems to be carefully integrated and orchestrated together, supporting close collaboration between actuaries and accountants.
  • Governance – Everyone working with data produced by the actuarial system needs full confidence in its calculations and a system that is not only well controlled but also has strong controls and auditability built in.
  • Mission-criticality – IFRS 17 puts actuarial systems front and center of its reporting requirements, the weight of which desktop platforms and glued-together processes will struggle to support.
  • Automation – For Solvency II and the like, many insurers have already implemented a “fast close” process, compressing the time needed to complete a period-end run. First, you’ll need to document all of the processes and people involved in producing actuarial reports. Having streamlined those processes, you should then be able to automate them through APIs that expose key attributes and enable workflow software.
  • Reputation – Is your platform’s vendor committed to continual improvements and embracing new technologies? IFRS 17 will not be the last regulatory change and technology will not stand still either. So you need to be sure of your vendor’s reputation and ability to accelerate improvement, reduce operational risk and lower cost of ownership with a strong end-to-end solution.
  • Scalability – IFRS 17 will create additional reporting requirements for all insurers and may be computationally intensive compared to your other regulatory reporting, especially if you do not habitually carry out large asset liability management (ALM) runs and stochastic investigations. Certainly, whether you’re a life or non-life company, the level of detail that you need to report on will increase. Internal managers are also ever more reliant on the results produced by actuarial systems to deliver new business insight. Can your system scale to meet these new demands on compute power and data?

Above all, you need to start thinking about all of these requirements right now, as risk management systems can not be installed overnight. What’s more, an enterprise actuarial solution will help you deliver constant business value across the whole spectrum of actuarial and risk analysis – from product pricing, valuations and ALM projection to driving five-year business plans.

In other words, regulation is just one reason to upgrade your risk management system today – and you should never underestimate the impact an enterprise solution could have on managing your business. Don’t let IFRS 17 be a shock to your risk system and prepare to achieve more than just compliance.


Tagged in: Institutional and Wholesale, Insurance Software, Insurance, Actuarial Modeling

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