Did insurers miss an open goal to resolve IT issues on Solvency II ahead of IFRS 17?
19 May 2017
- Insurance companies missed an opportunity to modernise their legacy IT systems estate during Solvency II
- Biggest impact on systems will be the speed of reporting required
- Keep an eye out for my series of blogs over the coming months
Insurance companies had the chance of a lifetime during Solvency II to swap out or modernise legacy IT systems - I think most of them missed an open goal. Many insurers’ IT systems were put in place in the 1980’s and 1990’s. Since then most have upgraded existing systems or bolted on new ones to address new challenges over the ensuing decades. Very few have completely swapped out or modernised their systems in the last 5-10 years. This now makes a systems refresh or change both very challenging and likely to be very costly.
With IFRS 17 looming, there are some significant implications for IT systems within insurance companies - they’ll need to handle much bigger volumes of data more quickly, amongst many other issues. That said, the biggest systems impact from IFRS 17 will be driven by the speed of reporting required. It’ll be around working day timetable (how long it takes insurance companies to pull together finance data for reporting purposes).
Impact on working day timetables
Compiling an IFRS 17 result is likely to elongate most company’s working day timetables. Many existing systems already do not have the flexibility to model different scenarios or change assumptions within the reporting timetable. Calculations will be much more complex. The volume of data will be greater. So results will take longer to compile. It’s likely to be more challenging to get at the right data. And that’s after the systems integration challenges have been resolved.
There’s simply too much to cover in one blog here, so over the course of the next six blogs I will be going into further detail on the following:
- Calculation of Contractual Service Margin (CSM)
- The impact on financial and reporting systems Impact
- Possible vendor solutions
- The impact on infrastructure
- How insurers might transition their reporting
- The future implications of IFRS 9
So keep an eye out over the coming months, but in the meantime, if you’d like to discuss any of these issues in depth do get in touch.