IFRS17 accounting engines

The time has come to finalise your IFRS17 vendor assessments

Like choosing your first bicycle when moving to Amsterdam to navigate through the exciting and beautiful small streets and canals to get from point A to point B, insurers now too need to choose what IFRS17 vendor solution (or combinations thereof) they will use to get from IFRS4 to IFRS17. Various vendors have built their own IFRS17 accounting engines and sold these to insurance companies over the past two years. Since then, small bugs have been fixed and new functionality was introduced. We’re at a point now where these solutions are fairly advanced and in some cases have been implemented in multiple insurers’ systems. If your company has not chosen an IFRS17 accounting engine yet (yes, you’re not alone! Multiple insurers have not reached this stage), now is the time to finalise your choice and purchase an IFRS17 solution. 

New releases

Time is short and the marginal improvements that still need to be made to deployed solutions are probably not worth the wait. While new updates will still be released, they are less likely to have a detrimental impact on your IFRS17 projects (like changes to input requirements that derailed some projects in the past). Input requirements are now fairly robust and one would not need to do significant rework when a new release came out (however, there is always a chance for a new release to throw you off track a little). We just need to be agile and deal with new releases as they come along. The vendors are very helpful in this regard and usually provide clear and timely documentation as to the changes that will be made so that you can prepare for them.

Different offerings

So what exactly is an IFRS17 accounting engine? Where does it plug into the insurers’ systems and what are the available options?

Well, not all the solutions offer exactly the same functionality, and some provide their own niche components. However, they all have something in common. Most of the IFRS17 accounting engines on the market (some of which I’ll explore in the next section) aim to produce disclosures under IFRS17 and IFRS17 specific subledgers. How they produce these disclosures varies across the different solutions, and so does what is needed as input and configuration. They can for example plug into your system’s architecture at different stages. Some solutions cover ETLs, some cover actuarial modelling, and some only accept inputs in a specified format to produce subledgers and disclosures. There are various reasons for selecting different vendors - this is covered in another article (to be released next week - watch this space!). Let’s take a look at the broad categories into which the solutions can be grouped.

Types of IFRS17 accounting engines

As I explored the functionality of the solutions offered by different vendors, I found they could be grouped into three broad categories:

• Pure accounting engines: These accept specified data as input (clearly explained in data dictionaries) and produce an IFRS17 subledger and IFRS17 disclosures. They don’t cater for the transformation of data, i.e. they require the user to transform data in their own staging platforms for use by the accounting engine.
• Hybrid accounting engines: These are essentially pure accounting engines with add-on features that help the insurer perform certain functions they can’t deal with internally. Example add-ons are components that help with ETLs (i.e. data inputs are more flexible and the solution can cater for the format in which you have data available), data warehouses that store all the data in one place, to some extent actuarial modelling components (mostly for non-life), and components that help with transforming subledgers into a format that can be used in your general ledgers.
• One-stop-shop offerings: These are all-in-one offerings where the vendor aims to provide components that can assist with all the required functionality. They cater for ETLs, advanced actuarial models (covering both life, non-life and risk adjustment models), management of data and assumptions, and transformation of subledgers into general ledgers. Whereas your hybrid accounting engines have some of these in different combinations, they don’t necessarily have all of them in one product like these one-stop-shop offerings.

The reasons for going with the different types of options above are explained in another article (to be released next week - watch this space!).

What’s on the market?

Here’s a list of vendors currently offering IFRS17 accounting engine solutions:

As you can see there is a wide array of vendors with IFRS17 solution offerings on the market (the above list isn’t even complete –apologies to those vendors not mentioned!).

The problem insurers have is choice overload.

Scrutinising the different vendor offerings on the market and comparing functionality and price points is a full-time job by itself. I’ve been on a few vendor assessment projects in the past and it took several weeks to get to a point where the functionality offered by each vendor was fully understood. Choosing which solution to go for is very important. Which makes it very handy to have a list of solutions to review so that we can select which one caters best for our exact needs.

Conclusion

It’s a time-consuming process to choose a vendor and I feel for the insurers who have needed to make this decision in the past. There are still many insurers left who need to choose their IFRS17 accounting engines. Luckily we’ve now progressed to a point where IFRS17 consultants understand the offerings and can help insurers to more easily make this choice with informed IFRS17 resources providing insights on the different solution offerings.

As my Dutch colleagues like to say: "Werk ze!"

Need help on your IFRS17 project with vendor assessments or implementation? Then contact me on LinkedIn to see how we at Virtual Actuary can assist.

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