IFRS 17: Rethink and revolutionise accounting and steering in the insurance industry
The opportunities of IFRS 17
Insurance companies in over 120 countries will have three and a half years to comply with IFRS 17, effective 1 January 2021. Implementing IFRS 17 implies a major transformation in actuarial and finance reporting processes, systems and data. The key challenge for insurers right now is to take the most appropriate decision that best fits their needs and aspirations for their Finance Operating Model.
IFRS 17: a meaningful investment
The answer to this challenge can no longer be reactive, tactically implementing another isolated reporting solution, each time a new regulation comes into force. Implementing a solution that addresses only IFRS 17 requirements might not address the recurring challenges of today's finance organisations: fragmentation, too many processes, lack of an integrated data model and a time consuming reporting process which is prone to error. This approach can lead to limited business insight, a lack of ability for scenario modelling or what-if analysis and prevents an intuitive and straightforward understanding and explanation of differences across valuations.
Besides new technologies and a modern finance system landscape, innovative approaches on how to master multi-valuation accounting are required. The Baseline Delta Approach establishes a common component across all valuations, while valuation adjustments ('Deltas') are specific components to a given valuation.
This raises the following questions with regard to upcoming IFRS 17 implementation projects:
- To what extent can the Baseline Delta Approach and an innovative finance subledger be the solution to your IFRS 17 challenges?
- It is wise at this stage to adopt a strategic instead of a tactical solution by considering the overall accounting approach and finance system landscape prior to the IFRS 17 compliance deadline on 1 January 2021?
- Is it an option to leverage IFRS 17 as a meaningful first step towards an innovative future finance solution, defining the common component baseline (best estimate cash flows) and protecting the significant investments with a sustainable long-term solution?
- Which implementation path should be followed to minimise risks while optimising long term benefits, beyond reporting compliance, such as concurrent fast close, continuous and insightful analytics and the reduction of reporting production?
This publication provides our views on these key questions and demonstrates how an IFRS 17 implementation project can be a meaningful investment towards a strategic, long-term solution.
For more information about IFRS 17, please contact Marco van Ackooij or Pelle van Vlijmen by means of the below contact details.