The objective of the standard is to standardise the measurement of insurance contracts across different jurisdictions. This will finally give stakeholders such as investors, regulators and competitors the ability to make comparisons of financial performance, current financial position, past performance and respective risk exposures between insurers, irrespective of their global location and their insurance subsector (e.g. life, general or health) for the first time.

IFRS 17 will generate an overhaul of how insurers present their financial performance and position, which will be primarily driven by the many accounting policy choices available as they transition into the new standard. And the introduction of more granular and detailed disclosure requirements will drive more collaboration between actuarial, accounting and financial reporting teams to satisfy this.

For example, under the new financial statements, insurance revenue will now be more comparable to other types of revenue under IFRS, as premiums (the historical revenue designation under NZ IFRS 4), will be split between “insurance service revenue” and “insurance finance revenue”.

The change in external reporting requirements is also likely to affect internal reporting, as performance metrics used to report to key stakeholders and to determine incentive remuneration for management and leaders may also be impacted. For example, the accounting policy choices available under the standard, could materially impact the profitability profiles for different products, which may require management to reassess the current product portfolio. The pervasive effect of this may result in the re-design of management’s own internal reporting.

With diligent planning the standard offers insurers the opportunity to transform their finance and actuarial functions in order to navigate the changes imposed by the standard, with the added benefit of improving the efficiency and effectiveness of their existing processes.

Insurers should utilise the implementation of IFRS 17 as an opportunity to also modernise and improve some, if not all of their processes, through the use of technological solutions.

Solutions available include insurance calculation engines, which store the respective data dependencies relating to insurers policies, whilst also automating the IFRS 17 computations and releasing outputs to the respective general ledgers. Thus, satisfying the requirements for a minimum viable product, which will get insurers across the compliance finish line.

Additionally, other solutions aim to automate processes which have been historically (and are currently still) performed manually, creating greater efficiencies, improved accuracy and ultimately transforming the user’s business. As IFRS 17 imposes more granular information requirements on insurers, such solutions will be important in assisting practitioners to manage and centralise their data in a controlled environment, which will auditable.
The latest technology gaining the most traction in the market are cloud-based solutions which provide reporting compliance platforms and enable insurers to connect their data from the various platforms used by users and automate their reporting processes across finance, accounting (external and reporting), risk and compliance.

These solutions essentially allow different business units to work and share information in parallel with each other, rather than through the traditional waterfall approach in a controlled environment, thereby increasing the efficiency of the reporting process. The cloud-based nature of these solutions allows users to access them from different locations around the globe, making them suitable and relevant for the ever-evolving working environment.

The malleability of these platforms is a game changer, as they allow insurers to configure them specifically to their respective requirements and for IFRS 17 compliant disclosures to be generated, as well as accommodating wider reporting requirements. In some jurisdictions these solutions have been tailored to assist management with their regulatory compliance output.

Strategic solution and process decisions will provide different internal stakeholders (e.g. finance, actuarial, human resources, financial planning and sustainability) access to the reporting platform, limiting the need to use ad-hoc communication tools and control document versions. Insurers can create a single source of truth for all their reporting requirements (i.e. to stakeholders, investors or regulators), resulting in greater efficiencies.

Ultimately, IFRS 17 is an opportunity for insurers to implement changes which will transform their business into a more operationally efficient environment, whilst also satisfying the evolving regulatory requirements the industry is facing.

Due to the complex nature of the standard, allowing sufficient time is key to developing a well-executed IFRS 17 project plan and design specific solutions tailored to meet the strategic needs of the business and shape the modernisation of an insurer’s finance function.

Connect with our team to hear how you could take advantage of tailored technological solutions and effectively and efficiently transition your business into an IFRS 17 world.