IFRS17 - DSP Perspective and Challenges
In the world of insurance accounting, the introduction of IFRS 17 has been a game-changer. This new standard, which is set to be applied for reporting periods starting on or after 1 January 2021, has far-reaching implications that extend beyond financial disclosures. It impacts all aspects of an organization, particularly the Data, Systems, and Processes (DSP). This article aims to briefly cover the challenges and complexities of implementing IFRS 17 from a DSP perspective. We will explore the operational impacts, discuss the solution approaches, and provide insights into the implementation roadmap. Through this exploration, we hope to shed light on the intricacies of navigating the DSP challenges in the context of IFRS 17 implementation.
Data
The implementation of IFRS 17 requires a thorough understanding of insurance contracts and the underlying financial and actuarial concepts. This can be challenging as it requires access to granular data, which can be effort intensive. Additionally, the data-intensive nature of IFRS 17 may require significant data preparation and cleansing.
#Challenge_1 - To analyze the existing data available and figure out what can useful out of that for calculations under IFRS17.
Solution to this challenge is carefully assessing and implementing the Sub-Ledger solution which evaluates the data available with particular insurer and have the capability to convert it to usable data. If the SL solution does not offer any data manipulation layer or data cleaning/checking, insurer can fall prey to delay in implementation and quite lot of manual efforts for data cleansing and manipulation.
IFRS 17 requires companies to collect and manage a large amount of data on a very granular level. This necessitates having the necessary systems and processes in place to collect, store, and report this information accurately.
#Challenge_2 - To figure out the data required for new calculations under IFRS17 which is either not available or was never calculated before.
Information on what is required for IFRS17 calculation, the granularity and other caveats are covered widely in practice papers, online material, webcasts & podcasts. SL Solution vendors can also help in determining the new data requirement.
System and Processing
Most of the existing systems used by companies for Actuarial, Finance or any other purpose are not capable of doing the calculations under IFRS17. Options are left for companies to either make significant changes to their existing systems or implement a new system to cater IFRS17 requirements. This includes developing new or adapting existing actuarial models, implementing new software systems, and leveraging opportunities for automation.
#Challenge_3 - To modify existing or implement new system. This leads to significant extra resources allocation in terms of human hours and cost.
?Solution to this issue is like mentioned, modify or implement a new solution. Though most of the life insurance modeling software's are offering the IFRS17 module with extra costs, the main challenge comes in with General insurers who were not using any existing actuarial software, or they were using custom build models on spreadsheets/R/Python.
In conclusion, the implementation of IFRS 17 poses significant challenges in terms of data management, system changes, and process modifications. However, it also presents an opportunity for insurers to improve their financial reporting and provide greater transparency to stakeholders.
#IFRS17
#DSP
#ActuarialModeling
Manager at PwC | Deloitte | CFA L3 | IIM Mumbai | EXL | VIT
5 个月Hi Mohit, Great article! I am on an IFRS 17 implementation project. I want to develop understanding of actuarial concepts so that I can execute my project effortlessly. Can you guide me to any resource which will be helpful in my journey.
Senior Actuarial Consultant at EY GDS, Ex Accenture, Life Insurance, Axis, Assam State Rank 1 Class 12
6 个月Informative!!!