IFRS 17, an International Financial Reporting Standard issued by the International Accounting Standards Board, comes into effect on January 1, 2023. As the replacement of IFRS 4 on accounting for insurance contracts, IFRS 17 completely changes the way insurance contracts are reported on the balance sheet and income statement.

In this article we outline the key challenges IFRS 17 poses for insurers and explain how Accenture’s new IFRS 17 PaaS (Platform-as-a-Service) can help to resolve them.

 

Insurers face data, technology & business challenges

The IFRS 17 standard foresees dedicated measurement models for each type of (re-) insurance contract. It applies to the recognition, reporting and valuation of all types of (re)insurance contracts and has an impact on the whole finance & risk landscape, from source systems, business warehouses, valuation engines up to consolidation & reporting tools. As with Solvency II, resolving underlying data and technology challenges will be the most time and resource consuming activity. Challenges for the business should also not be underestimated because a clear understanding of the newly reported figures and underlying assumptions remains the first priority.

Underlying data challenges:

  • Different types of data are required (product details, actuarial projected cashflows, accounting actuals, counterparty information…) at levels of granularity finer than most insurers are accustomed to.
  • With the volume of data rising exponentially, insurers will encounter more and more difficulties with increased processing times for their legacy applications, databases and valuation engines.
  • Data will be re-used in different systems generating reconciliation issues.
  • Limited transparency on the data quality, accuracy, reliability early on in the reporting chain.

Underlying technology challenges:

  • Multiple software solutions must be combined as no market solution covers the full end-to-end IFRS 17 process (from actuarial to consolidation).
  • The IFRS 17 standard is very recent. As such, various aspects of the norm have not yet been implemented by the different software builders.
  • Many IFRS 17 specific software solutions offer standardized calculations that do not cover specific products and often require a lot of customization, adding hidden implementation costs and complicating the maintenance phase.

Underlying business challenges:

  • Black box effect – Complex proprietary coding languages make it more difficult for the finance department to grasp the assumptions and calculations underlying its balance sheet and income statement.
  • Due to these challenges, most insurers are facing a complex implementation process where the finance department has limited visibility on the final balance sheet and income statement until very late in the implementation phase.
  • Closing periods are becoming increasingly short giving the finance department limited time to finalize all disclosures.

 

Plug & Play to overcome these challenges

Accenture has custom-built an IFRS 17 platform for one of its non-life-chartered insurance clients in Europe operating globally. We are now opening this platform as a Plug & Play PaaS to benefit all our insurance clients. The platform leverages open source programming languages, runs in the Cloud, and covers the end-to-end IFRS 17 chain, from the projection of the actuarial cash flows, to the calculation of the IFRS 17 disclosures and the accounting. Implementation is fast with no software licensing costs, plus the platform is modular enough to take into account the specific customization requirements of every insurer and will be extended in the near future to cover a wide range of finance-risk-actuarial regulations such as IFRS 9, Solvency II, local GAAP modelling…

As visualized below, our Plug & Play PaaS consists of an (1) Actuarial engine leveraging open source R actuarial packages; (2) an IFRS 17 calculation engine, which currently covers two measurement models (BBA & PAA), multiple lines of Business and calculation at both contract or unit-of-account level calculations; and (3) the Accounting engine containing the accounting logic that can easily be connected to any accounting software.  An end-user interface built as a JavaScript (JS) application allows the actuary, risk officer and accountant to visualize the data and to analyze the results.  

 

Want to know more about our IFRS 17 PaaS (Platform-as-a-Service)? Please reach out to Mathias Heyse.

 

Nicolas Pireaux

Managing Director – Insurance Practice Lead

Cédric de Vile de Goyet

Director – Strategy & Consulting

Subscription Center
Subscribe to Accenture Belux Blog Subscribe to Accenture Belux Blog
Subscribe