How to Create an Immutable IFRS 17 Grouping Table while Managing Migrations and Data Volatility

In a nutshell?

IFRS 17 requires entities to identify portfolios of insurance contracts comprising contracts?subject to similar risks and managed together.??

Each portfolio of insurance contracts issued shall be divided into a minimum of:?

• A group of contracts that are onerous at initial recognition, if any;??

• A group of contracts that at initial recognition have no significant possibility of becoming onerous subsequently, if any; and??

• A group of the remaining contracts in the portfolio, if any.?

Our client, a South African life insurer, needed a way to keep track of their IFRS 17 groups – for all historic policies that they have sold across multiple business books and admin systems – that is robust enough to handle system migrations, and is flexible enough to be used by different teams, such as the actuarial team, finance team, BI, etc.?

How we did it?

Insight Life Solutions (ILS) designed a system that uses a large master grouping table that contains the entire business’s full history of policies and IFRS 17 groups.??

ILS designed the master table structure to be lean, robust, and technically efficient for querying and joining on despite its size. We built a system that automatically looks up previously assessed/ determined IFRS 17 groups from this master table as part of the standard data conversion and cleaning process.??

We built a flagging system with a complete set of errors to help our client manage the IFRS 17 groups and data errors. This flagging system carries out a series of checks to produce an error report that flags, for example, policies that are in-force but don’t have a group yet or new business policies that do not have enough information to be grouped accurately.?

We also built auditing capabilities on this grouping/master table for users to track, for example, how a policy changed over time, who added the grouping entry, and who signed the grouping off.?

Benefits of the IFRS 17 Grouping System?

• It is robust enough to handle system migrations and can work efficiently using different policy systems.?

The system is dynamic enough to work with different policy systems, ensuring it can handle migrations where policy information is migrated from one system to another. This also makes it possible for other life insurers to make use of this grouping system, since it is not dependent on one process or policy system.??

• It is flexible enough to be used by different teams.?

With different teams, such as the finance and actuarial teams, working more closely since the implementation of IFRS 17, systems need to be developed to be user-friendly for all parties. The system is robust enough to be owned by the actuarial team, but still be used by other teams, such as the finance team.?

• It provides users with detailed information and error reports.?

The error report gives users detailed information on errors by, for example, notifying you if a policy does not have enough information available for a grouping, or if a policy isn’t grouped yet. This allows you to rectify any possible data issues or errors continually. Additional information reports produce information about the distribution of policies into profitability buckets for enhanced checking and sign-off.?

• It provides additional, necessary audit information.??

It creates a built-in audit trail, providing useful information, such as who completed the grouping assessment run, when it was completed, where the result is saved, who added the grouping entry, and who signed off the grouping.?