Fintech Finance presents: The Insurtech Magazine 04

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FLASH POINT: IFRS 17 is ‘the biggest change in 20 years’

A catalyst for change Implemented correctly, the new IFRS accounting standard for reporting of insurance contracts could have a transformational impact on businesses’ digital and cultural frameworks. Brian Heale of Aptitude Software and Eduardo D’Alma of Q_PERIOR discuss their options Insurers would be wise to treat the implementation of new global accounting standards for insurance contracts as more than just a tactical compliance project. They can use the opportunity to re-think finance and compliance processes and future use of data to modernise their finance function and achieve strategic value far beyond compliance. That’s the view of insurance experts at London-based Aptitude Software, which provides finance, accounting and regulatory software, and is working on IFRS 17 implementations with insurers across the globe, and change management consultancy for the insurance industry, Q_PERIOR. We brought the two companies together to discuss International Financial Reporting Standards (IFRS) 17, described by EY as ‘the most significant change to insurance accounting requirements in 20 years’ in enabling more comparable and transparent financial reporting of


TheInsurtechMagazine | Issue 4

insurance contracts across the world. The date for compliance was 2022. Although that has now been delayed by a year, IFRS 17’s complexity means there is still a lot to do in a short time. Aptitude’s IFRS 17 Solution is purpose built, comprising of a calculation engine to manage groupings, cohorts, risk portfolios and supplement calculations, such as contractual service margin, and an accounting hub that consolidates accounting and actuarial data and provides advanced, multi-generally accepted accounting principles (GAAP), multi-entity, multi-currency accounting subledger capabilities with benefits for both finance and actuarial departments. It also offers integration with actuarial, finance and policy systems, including SAP and Oracle General Ledger, and can deliver high-volume and large-scale GAAP accounting. The solution enables insurers to leverage all IFRS 17 measurement approaches, including the general

measurement model (GMM), premium allocation approach (PAA) and the variable fee approach (VFA). Brian Heale, senior insurance and IFRS 17 consultant at Aptitude, says that whichever approach is followed, the standard’s introduction will mean the accounting and actuarial worlds will need to work closer than ever before. But there are both business and technical challenges to that, says Eduardo D’Alma, a partner at change management consultancy Q_PERIOR... here’s why. THE INSURTECH MAGAZINE: Do you think insurers underestimated the complexity of IFRS 17? BRIAN HEALE: In our experience of implementing more than a dozen IFRS 17 projects so far, most clients have significantly underestimated the complexity. To be fair, I think software vendors may have also underestimated the complexity: converting the actuarial results/transactional data automatically