How can you use your investment in Solvency II to implement IFRS 17?

03 October 2017

Blog snapshot

  • Insurance companies can use some models, systems and processes developed for Solvency II for IFRS 17.
  • It is important to understand the differences between Solvency II and IFRS 17, not only so you know the scope of developments required, but also so you can manage your business in the new world.
  • Download our guide to using your Solvency II investment to implement IFRS 17, which includes a detailed comparison of the differences between the  frameworks.

 

After a number of years of development, Solvency II came into force on 1 January 2016. Many insurers completed their first annual reporting cycle just as the latest insurance accounting standard, IFRS 17, was published in May 2017. There are a number of similarities between the Solvency II and IFRS 17 models - for example the basic components of a best estimate and allowance for risk are the same, along with many of the underlying cash flows in the best estimate. So how can you make the most of the investment you made during your Solvency II implementation for the purposes of IFRS 17?

 

As an initial step, it is important to understand the key areas of difference where the most development from Solvency II model, systems and processes will be needed. For example:

  • Under IFRS 17, the recognition of the profit arising from an insurance contract is spread over the period of coverage - this is achieved by including a ‘contractual service margin’ liability which is not present under Solvency II.
  • Certain components of Solvency II are heavily prescribed by regulation or set at a legal entity or fund level - the allowance for risk and the discount rate, for example. IFRS 17 is more principles-based which allows for greater levels of judgement to be incorporated. But the significantly lower tracking of movements in liabilities for profit recognition under IFRS 17 is likely to drive a number of new system developments.

 

Download our comprehensive guide hereto make the best use of your existing Solvency II systems and processes to ensure as smooth and efficient a transition to IFRS 17 as possible. Alternatively, if you’d like to discuss any of the issues I’ve raised here or in the publication please do get in touch.

 

*NB - You will need to register at PwC Inform to access the comprehensive guide

 

Anthony Coughlan | IFRS 17 Actuarial Director
Profile | Email | +44 (0)20 7804 2084

 

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