How Reinsurers Can Prepare for IFRS17 | Eurobase Blog

As the UK prepares to gradually reopen the economy over the coming weeks, all eyes now turn to how the (re)insurance industry will adapt to the ‘new normal ‘. While companies remain divided over whether the recent trend of homeworking will continue (HSBC boss Noel Quinn scraps executive floor at London HQ), two points remain clear:

1. Successful companies will have processes that do not require people to meet face-to-face.
   
   
2. Successful companies will implement these processes as soon as possible.

A key element of the ‘new normal’ will be ensuring regulatory compliance and, while the world has been grappling with the pandemic, the deadline for IFRS17 has drawn ever closer. Indeed, in our opinion, regulators will stress the importance of reliability in the financial market when the world may face a continuing recession and the aftermath of the BI insurance gap identified by COVID’s impact on the working world. The choices are stark for companies and EY explains this well in their recent document, The deferral of IFRS 17, and the impact of COVID-19.

So how does a (re)insurance organisation prepare for new regulation when our ways of working are going to change?

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It is important to note that the IFRS17 regulation is still subject to review (it was last updated in May 2020). The details of the requirements may change and the IFRS Foundation has been clear in supporting the new standard during the pandemic with additional time being provided (and materials being produced). However, no extension to the implementation timetable has been provided. There are key points that are already known:

• The generation of IFRS17 reports requires both actual and forecast information.
  • This data is typically found in a combination of the Policy Administration Platform, Actuarial Reserving Platform, and General Ledger.

• Remember that there are various models that can be used. Their suitability will depend upon the types of (re)insurance written. These are below, and there is a reasonable description at IFRS 17 Explained.
  • The General Management Model (GMM)
  • The Premium Allocation Model (PAA)
  • The Variable Fee model (VFA)

There are several providers who will consolidate the data into the required reporting standards.

• A key differentiator between providers is the amount of work required to present data in a consumable way.
• Another key point to consider is the roadmap of the provider – how will their product develop over time?

Both factors will assist the (re)insurer in selecting their provider, but what objectives should be in place to support this regulation in the future?

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Bringing together the implementation of IFRS17 into a remote environment is going to rely on key processes being automated. As we’ve seen above, multiple systems may be required to collate the information so the quality and consistency of that data will be important.

• Do your core systems readily share information and are there clearly defined standards?
  • Standardised interfaces will ease the delivery of the required data mentioned above.
  • If the Actuarial Reserving Platform contains sufficient data on the actuals, there may not be a requirement for direct connections between the Policy Administration Platform and the IFRS17 reporting solution.

Eurobase has developed Synergy2, our end-to-end (re)insurance platform to capture all the actual data necessary for typical IFRS17 reporting. When this is paired with a suitable actuarial reserving platform this streamlines all the information necessary for IFRS17

• Do you have a defined data dictionary?
  • The ability to understand and consolidate data will be key in selecting a vendor as this will determine whose data structures are best aligned to yours.
  • Many of these interfaces are proprietary and represent the key IP.

Through working with several partners, Eurobase has a proven interface with IFRS17 reporting vendors and a clear data dictionary, enabling a reliable transfer of data.

• How confident are you in the quality of your data?
  • As with all automation, the ability to join this information together is limited by the rule of GIGO. Poor data will cause issues when collating the information and when considering the results. These issues will need to be fixed before the IFRS17 project starts to avoid costs spiralling.

With a single source of data, Synergy2 manages the validation and quality of data across Underwriting, Claims and Accounting – providing consistent information to reserving and reporting systems.

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So, there are many activities that (re)insurers could progress to enable a smooth migration to IFRS17 standards. These will add value not just to future regulatory reporting but will also add to the resilience of processes across the company. With the unexpected closure of offices for the last year, resilience and flexibility will be required in the future in the face of the next unexpected challenge.

If you would like to discuss your IFRS17 requirements, please arrange a call with our Insurance team who will be happy to advise you.