How insurers can take the cost out of IFRS 17

How insurers can take the cost out of IFRS 17

Daniel Trzesniak from Systemorph explains why IFRS 17 budgets do not have to be massive

Caspar Herzberg |


This article first appeared in the Winter issue of The Record.

The time for IFRS 17 (previously known as IFRS 4 Phase II) is finally coming. The future accounting standard for insurance contracts is presumed to be finalised in early 2017, with an expected effective date of 2021. The long timeframe allowed for the implementation is an indication of how complex the industry is expecting this project to be. From the perspective of leading consultancy firms, IFRS 17 will emerge as one of the biggest operational challenges insurers face to date.

The challenges are not merely accounting topics, but fundamentally related to data integration: the standard enforces traceability and reproducibility of all data and calculations to the very source. Currently, only a few companies have achieved this level of integration. In most cases, systems have grown in silos, data exchange is largely file based, and often human interaction is needed to adapt files in order to match the granularity and the data language required by group reporting. This process is error prone and will not fulfil the requirements of IFRS 17. Therefore, insurance companies will have to redesign processes and systems to adjust how data is being produced, collected, stored, distributed and analysed. The consistency and transparency of the data submitted from the business units to support group reporting will require a substantial improvement.

Integrating historically grown data silos is a difficult exercise. Many of these systems are not easy to maintain, and the data languages are different and hard to align. A common data language needs to be created in order to fulfil group reporting requirements. However, the local systems will also have to comply with local regulatory and market standards. In our experience, out-of-the-box systems do not have the flexibility to deal with these complex data landscapes, so a tailor-made solution is required. Using a traditional development approach, tailor-made solutions become very expensive, both to develop and to maintain. But budgets are limited nowadays.

This is where a smart data platform (SDP) can support: all the technical concerns such as audit trails, data lineage, and proper versioning of data can be provided by a standard technology, whereas the content, such as the data model and business processes, can be highly customised to the internal existing systems. This enables companies to deal with their legacies gradually and benefit from a high level of integration through the SDP.

Special attention should be drawn to data versioning, as most of the reference data evolves over time. For instance, organisational changes will require the reporting units and portfolios to be adapted not to violate referential integrity. This is a problem for all data systems, and only a few technologies can deal with such requirements. The technology chosen should guarantee that all data states can be captured appropriately so that comparison among different years is efficiently handled. Version control for data provided by the SDP can elegantly address this issue and satisfy requirements.

IFRS is not the only process to provide information on economic financial statements. Insurers will also have to produce other reports on a regular basis. As such, related IT systems will need to support multiple live data sets in parallel based on a consistent data language. The systems shall enable transparent reconciliation between these reports and ensure reproducibility. Supporting such a complex process in an integrated environment is far from easy. It is therefore crucial that the SDP has appropriate versioning features to handle multiple live data sets working in parallel, like data branches.

Systemorph Vertex is an SDP technology, which tackles all the issues discussed above. Thanks to the rich set of features already included, it allows for an ultra-rapid development of custom content able to efficiently address the cost and timeline issues associated with IFRS 17. The key requirements of traceability and reproducibility are fulfilled by design. Moreover, to our knowledge it is the most complete version control system for structured data. With Systemorph Vertex, insurers can focus on the business content of IFRS 17, and not spend resources on the IT concerns of data integration. Choosing the right technology is key to the successful implementation of IFRS 17. And Systemorph Vertex is a leading solution.

Daniel Trzesniak is head of marketing at Systemorph

 


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