Transforming insurance financial planning

Is it time to prioritize FP&A reporting?

Financial planning and analysis (FP&A) is one of the most important functions of an insurance company, yet one of the most chronically underfunded activities. It is tasked to provide strategic business insights and help the company plan, forecast, and budget to support business decisions. Corporate finance FP&A also performs the ongoing assessment of the financial health of the company based on key benchmarks and performance metrics. Due to the long-duration nature of life insurance and annuity products, such benchmarks and metrics are often tied to one or more valuation and accounting bases, hence any changes to the relevant basis would have an impact on FP&A activities. 

Changes in accounting regimes have accelerated the long-overdue need for insurance companies to update outdated valuation systems and models. Over the past few years, companies across the globe have collectively invested more than a billion dollars to implement solutions and adapt to the wave of the largest changes in the history of insurance accounting including Long-Duration Targeted Improvements (LDTI) and International Financial Reporting Standard (IFRS) 17. 

Insurance companies now have the time, space, and resources to process the profound impact the new accounting regimes have on financial storytelling, performance measurement, and management, thus posing challenges as well as opportunities, especially for the FP&A function in a post-LDTI/IFRS 17 world.

Strategies for insurance financial planning

A recent Deloitte FP&A and Actuarial Study of L&A insurance companies found that many insurers struggle to integrate their FP&A and actuarial processes, which can negatively affect their ability to manage enterprise performance. Companies consistently cited a lack of connected solutions to enable collaboration and information-sharing between FP&A and other functions. Sitting as a key connection point between strategy, operations, reporting, and valuation, if the right level of collaboration and the right toolsets are put in place, the FP&A function would be uniquely positioned to deliver true and timely business insights to drive value creation.

Projecting into the future with confidence is currently a challenge, but being a strategic partner, the FP&A team can take on the following unique opportunities:

Seize the momentum to strengthen FP&A capabilities

As the compliance exercise for accounting changes and related implementation efforts conclude, we believe several great opportunities are presented to the FP&A function to make the best of the current momentum. The FP&A function could capitalize on the investment in technology and talent over the past few years and take the opportunity to strengthen integration with other functions to enable a truly connected and continuous planning process. 

An FP&A leader needs to be part doctor and part artist, so it is critical to be equipped with the tools and ability to assess the financial health of the company in a timely manner, analyze complex business scenarios and propose alternatives, articulate financial results in a meaningful way, and forecast the future with confidence. 

Strong FP&A capabilities are what sets one organization apart from others in terms of improving business decisions and driving business performance to better position the company to achieve success.

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