IFRS 17 extension to 2023
IASB has extended IFRS 17 to 1 January 2023. This is a one year delay to the date proposed in June 2019 as per the amendments to IFRS 17 Insurance Contracts. IASB also recommended an extension to the IFRS 9 exemption in place for some insurers to coincide with IFRS 17 implementation. Insurers now have the time to plan strategically for a long-term solution to fix the underlying problems in finance today. Stay focused on these four parameters to guide your investment.
- Unified Repository for Risk, Finance, and Accounting
Data has been the single most difficult challenge in this equation. There is no single system in which the data is required for IFRS 17 calculations will magically appear. Today data resides in legacy silos across the organization. Not only is it challenging to bring this data together in one place for reporting, but most firms lack a unified data model to support harmonization. As a result, the legacy infrastructure makes it difficult, if not impossible, to gain a single (trusted) source of truth. With the extension of another year, this is a perfect opportunity for insurers to revaluate their legacy systems and data flows and take strategic initiatives to consolidate data across multiple silos such as actuarial, policy admin, accounting, business, and so on.
- Strategic View from Data to Enablement
To achieve a successful implementation of IFRS 17, you need to review all affected areas of your business strategically. Fundamentally, it’s all about consistency and a reliable connection between Actuarial and Finance functions. Looking only to enhance existing processes and capabilities is a patchwork approach that may not get you the efficiency desired.
Data Quality and Reconciliation – Validate input data through a pre-configured, contextualized data quality process and a reconciliation framework to ensure balances between policy and accounting systems are resolved before the data is used for liability calculations and reporting.
Portfolio Aggregation – There should be flexibility in the way multiple dimensions can be set up, such as product, geography, currency, date of inception, coverage type, and so on.
Contractual Service Margin and Liability Measurement – Use pre-configured business rules for GMM, PAA, VFA, and Re-insurance calculations. Ensure you have the flexibility to configure the existing variables, including calculation methodology.
Accounting Enablement – Prioritize a seamless integration between calculated results and posting rules. Have different event types, such as a chart of accounts to generate insurance revenue and P&L. You should have full visibility of the journal entries within the IFRS 17 sub-ledger before it becomes part of the General Ledger.
- Automate Reporting & Workflow
Reporting of IFRS 17 results is still a CFO function. CFOs are creating a more lean and agile service to achieve efficiency in the analysis and decision-making process, with full access to data—at the most granular level. Your best advantage is to move away from manual management of ledgers to a more robust architecture. With quality controls in place to streamline and automate the upload process on-time, you gain full transparency and auditability. The strategic architecture should support complete and efficient multi -GAAP accounting for all financial transactions and seamlessly integrate IFRS 17 & 9 sub-ledgers along with other sub-ledgers. The process should also support error correction and adjustments with clear integration into accounting workflows, including controls to support traceability and reversals, ensuring timely and accurate monthly close.
- Clear Path Integration into FP&A
Integration of IFRS 9 and 17 results in Financial Planning & Analysis (FP&A) is vital. Actuaries should have the flexibility to see the impact on the liability calculations across multiple scenarios and run projections across various time frames. These results can integrate into planning, budgeting, and forecasting. Accounting should have the same flexibility to see the impact of different scenarios on P&L, trial balance, and see its effect via movement analysis reports. The projected sub-ledger could inform part of planning and budgeting, giving the CFO more visibility on the projected balance sheet and P&L statement under different scenarios.
Bottom Line: Tackle IFRS 17 with Due Diligence. Capitalize on Data, Process, and Modern Technology.
Insurance firms seek to improve operational efficiency across the board. With increased data management and reporting requirements under IFRS 17, firms will need to consider new levels of automation across data capture, data quality, and liability measurement processes-to report generation and reconciliation. This goes to the heart of management report visualization and extensive slice and dice analytical capabilities.
Given the extension, Insurance firms should not reduce the current pace of progress, but to use the time as a boon to improve data, infrastructure processes, and allocate more time to User Acceptance Testing (UAT) and parallel runs. With the shared effective date for both IFRS 17 and IFRS 9, you can reduce implementation costs and potential earnings mismatches - act on your time wisely.
To learn how you can plan your time to accelerate the journey to IFRS 17, feel free to message me to explore more or have a conversation.
For more information, please visit:
Oracle Corporate Banking Solutions: www.oracle.com/IFRS17
Oracle Financial Services: oracle.com/financial-services
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