3 minute read 18 Jun 2018
man office thinking ideas

Ten key actions to kickstart your IFRS 17 implementation

By

EY Global

Multidisciplinary professional services organization

3 minute read 18 Jun 2018

Implementation will require firms to address data governance, lineage and transparency across the entire reporting chain.

IFRS 17 represents the most significant change to insurance accounting requirements in over 20 years — it demands a complete overhaul of insurers’ financial statements. This major change program to implement IFRS 17 will extend beyond the finance and actuarial functions of insurers —its impacts will need to be communicated to a broad range of internal and external stakeholders.

IFRS 17 will require organizations to ensure data governance, lineage and transparency across the entire reporting chain. This includes a wide spectrum of data that will be used, from historic or current data (e.g. policy and premium data or data to produce the risk adjustment) to forward-looking data (e.g. data used to produce cash flow projections).

To start, insurers should work with internal and external stakeholders to assess the current data flows and identify potential gaps. In doing so, it is critical to have the future state in mind to identify data requirements across the existing data and systems landscape.

In addition to data flow and system analysis, it is important to review your data management capabilities at the enterprise level. This includes the end-to-end data architecture and flow (e.g. source, master and reference data once for multiple uses), data governance process and policies (e.g. access controls and ownership), and the Target Operating Model (e.g. chief data office and interaction model) to “manage data as an asset”. This will help you to define target-state data architecture to meet IFRS 17 Standard and company’s strategic direction in data management. 

Three approaches to achieve your long-term vision through IFRS 17 implementation

1. Actuarial-driven solution: leverage existing DSP for IFRS 17, and build on MCEV/Solvency II tools and models wherever sensible.

Pros

  • Probably easiest and fastest solution to implement
  • Built primarily on existing reserving, MCEV and Solvency II tools and processes
  • Lower investment required

Cons

  • Less efficient system setup (more add-ons)
  • May not fit the future IFRS 17 reporting timelines and new requirements (e.g. controls)
  • Considerable manual steps means higher operating costs

2. Integrated IFRS 17 solution: build IFRS 17 capabilities through the introduction of an integrated solution that connects the finance and actuarial systems

Pros

  • Opportunity to implement a new, more efficient system setup while leaving old systems intact
  • Shorter time to benefits realization
  • Ancillary benefits in areas outside IFRS
  • Information at a more granular level

Cons

  • Multiple data sources and complexity of the process means higher implementation risks
  • Large upfront investment required for new solution with potentially limited lifespan
  • Critical path risk (need a “plan B” or parallel runs)


3. GL embedded solution: provide an IFRS 17 platform through a central finance system

Pros

  • Higher flexibility of the implemented solution
  • Enables addition of other requirements (e.g. IFRS 9 and Solvency/RBC)
  • Lower critical path risk
  • Single-source of truth for Finance, Actuarial and Risk

Cons

  • Takes longer to realize benefits from migration
  • Likely to have some manual steps and solutions resulting in higher cost
  • Could be expensive to implement and technology still unproven

Ten key actions to kickstart your IFRS 17 implementation

These ten steps encompass three broad categories: impact assessment (1–3), stakeholder engagement (4–7) and implementation (8–10).

  1. Understand IFRS 17 requirements
  2. Perform gap analysis (using pre-populated templates where possible)
  3. Conduct impact assessments around architecture, data, systems and processes
  4. Conduct business and technology briefing sessions
  5. Report findings and implementation approach to Board, executive team and key stakeholders
  6. Discuss findings with external auditor and regulators
  7. Seek approval for next Design phase
  8. Mobilize project resources and key internal and external stakeholders
  9. Provide core team training
  10. Develop implementation roadmap and budget

Summary

As you begin IFRS 17 implementation, we help you assess its financial and operational impacts, communicate with stakeholders and mobilize an implementation plan. Our tools help structure the project in a complete and efficient way, allowing you to focus on your most important business issues.

About this article

By

EY Global

Multidisciplinary professional services organization