Partnering with insurers on the IFRS 17 journey

John Bowers, Actuarial Product Director and Matthieu Soulas, Actuarial Delivery Director at RNA Analytics, review how insurers have implemented IFRS 17, and the next steps moving forward in this Q&A, conducted by InsuranceERM.

What implementation challenges has IFRS 17 posed insurers?

John Bowers: Many of the larger insurers have heavily invested in ensuring teams have the skills and understanding to address the requirements of IFRS 17. Some smaller and medium-sized insurers, meanwhile, have struggled with those increased demands while still managing their business as usual (BAU) activities. Particular challenges have arisen in modelling, project management and a full understanding of the standard. IFRS 17 has also involved internal discussions between different departments at insurers, such as actuarial, accounting and IT. We have seen companies opting for the Premium Allocation Approach (PAA) approach to IFRS 17 rather than the General Measurement Model (GMM). The PAA approach is a simpler method. As an actuarial modeller, I prefer the GMM approach as the solution can be better leveraged for other purposes.

Matthieu Soulas: During the implementation phase, some companies realised they had issues collecting the data for IFRS 17 as they were using old hardware and databases. For some insurers, it seemed like each time they allocated resources to solve one critical issue, there were no resources for other parts of the project.

How differently have insurers approached IFRS 17 implementations? Has the main driver been compliance or transformation?

Matthieu Soulas: We operate in markets across the world, so it has differed. Generally, clients have been implementing IFRS 17 because they had to. The standard was an opportunity for transformation, but in many cases our clients viewed the reporting rules as an issue they had to deal with by a specific date, and they did not really have time to manage their other BAU work.

John Bowers: A lot of it comes back to how prepared companies were when they started. For instance, Scandinavia and South Korea were ahead of other countries with their IFRS 17 implementations. For those countries, the standard has been much more of an opportunity for transformation. By comparison, in Spain, the standard’s implementation for insurers stalled due to delays in the publication of the local regulator’s version. Also, the larger companies have been more able to be engaged than others.

With the standard now in effect, what is left for insurers to do?

Matthieu Soulas: For those that are ready, it will be more about consolidating their different processes especially between IFRS 17 and Solvency II. It will be about refining the internal processes and refining data collection.

John Bowers: Auditors are now getting involved and they are starting to highlight good and bad issues.

Do you think insurers have been successful in realising value from IFRS 17 implementations?

Matthieu Soulas: In my view, it is too early to talk about that and start assessing whether IFRS 17 has been a success or not. For insurers to realise value from the standard will depend on the size of the company. One challenge is that today there is no standard layout provided by regulators for IFRS 17, so, everyone is creating their IFRS 17 disclosures based on communications, conferences and documents provided by the big four accountancy firms. We have been working with other clients in North Africa that have adopted what they think the regulator will dictate, but they are unsure. This shows me the full implementation process of IFRS 17 is not yet done.

John Bowers: There have been short-term gains around end-to end functionality of modelling processes, greater accuracy and increased run speed efficiencies. In the long-term, it is quite early to assess IFRS 17’s benefits. Once we get past this bedding in period, the real advantages will hopefully begin to emerge – and particularly if those companies have more advanced systems that have been fully road-tested they can yield the benefits of lower maintenance and lower running costs and produce more robust results and reporting. We are also looking to encourage nested stochastic modelling for a range of purposes, both for new business modelling through to Solvency II and IFRS 17 business planning.

Originally published by InsuranceERM in the ‘IFRS 17: understanding implementation and next steps’.