Insurers are still spending, on average, a whole month to close the quarter’s books and even longer to close last year’s results. This manually intensive effort fails to provide forward-looking business insight. The numbers are often produced too late in the quarter to be used as the base for real management information in the month.
Some companies also face the significant challenge of having to report under as many as 25 accounting bases, as well as reporting their group accounts under IFRS or US GAAP and their capital under different reporting bases, including Solvency II. This makes the reporting process cumbersome, full of reconciliation and manual activities, error prone and time consuming.
Insurers in the Americas already have relatively fast reporting capability, but still seek improvements. European insurers have also been speeding up their reporting as a result of new regulatory requirements under Solvency II, which have triggered significant investments in process reengineering and reporting systems. But Asia-Pacific is aiming for the greatest reduction of financial close time, to be achieved through investment in new technology and people.
5. Implementing regulatory and financial requirements
The majority of CFOs (more than 70%) expect the regulatory and accounting changes to insurance contract and financial-instrument accounting to be effective in their organization by 2021. CFOs may be viewing the interim period before the IFRS 17 and IFRS 9 requirements must be implemented in 2021 as a valuable window in which to focus on enhancing their business partnering capabilities.
However, over half of insurers have so far only performed a limited preliminary impact assessment for IFRS 17. Insurers that have begun detailed analysis, based on the latest draft of the standard, are starting to seet he sheer scale of the challenge: from understanding and presenting their numbers to investors through to impacts on data, processes, systems and reporting timetables in the lead up to and beyond 2021.
When implementing IFRS 17, CFOs need to retain a business perspective, approaching the project with the overriding aim of achieving an efficient operating model. They need to be simultaneously striving for integrated data, systems and processes across finance, actuarial and risk.
CFOs know they have to keep on top of the evolving regulatory requirement, which they would like to become a ‘hygiene’ factor in their function. This is challenging, especially for European insurers that have still not fully embedded Solvency II. CFOs do not want continuous regulatory and accounting change to divert them from increasing their focus on driving business growth.