IFRS 17: How actuarial modelling simplifies your financial reporting complexities
12 February 2021
Strict timelines. Increasing and diverse regulatory requirements. Huge amounts of data. Financial reporting is never as easy as it should be. For actuarial teams currently feeling the pressure, the move to remote working provides added challenge. With IFRS 17 looming, the role actuarial modelling software can play in easing reporting complexities is worth exploring.
Meeting the working day timetable
A common financial reporting challenge is the working day timetable. Our clients are being asked to produce more, in less time, while maintaining the appropriate controls and workflow orchestration. IFRS 17 brings further complexities. More components mean more strain on the working day table with additional runs to the existing actuarial and financial processes. Control steps are required to be quicker and more automated than ever before. Materiality thresholds, automation and/or model optimisation are all some of the approaches we’ve been using to help our clients address these issues.
Producing multiple financial statements
The level of granularity required by regulation is changing, with added requirements for Unit of Accounts under IFRS 17 over and beyond Homogeneous Risk Groups under Solvency II (SII) and local GAAP. There are also stakeholder requirements from internal MI and analysis, and a focus to providing synergies and transparency. We have been helping our clients explore these synergies by helping them produce multiple reporting matrices, within the working day timetable, and explain and contrast the different outputs.
New actuarial modelling solutions
IFRS 17 adds complexity to modelling. There is a need to perform a large number of additional runs, store results and have robust links between the actuarial calculation engine, data layer, and accounting systems. Our last Vendor 4.0 blog noted some functionalities other vendors are developing to address insurer's modelling challenges. Through our relationships with these vendors we are aware of their efforts to support clients in meeting the demands of IFRS 17 and LDTI. FIS Prophet is one such vendor, which we’ll explore further in this blog, but RPC Tyche and WTW RAFM are other popular solutions to name a few.
With 140+ Prophet users in our global network, we’ve drawn on our experience in using this software to showcase how it helps address the challenges mentioned above.
- Modules and Looped Modules are a new coding functionality which addresses the working day timetable issue. They provide the ability to run several reporting calculations within the same Prophet run. This allows models to calculate the SII and IFRS 17 results as part of the same runs, reducing the risk of inconsistency, effort and run times.
- Flexible Results provides the ability to split Prophet results by more than one dimension, such as Unit of Accounts for IFRS 17 and Sub Product Code for Solvency II. This enables the insurer to optimise the model in producing multiple financial statements and drives reconciliation across reporting bases. It also limits the additional reconciliation controls typically needing to be designed.
Deploying any vendor solution requires careful, bespoke design and implementation. To get the most out of any solutions, it’s important to assess your reporting requirements and ambitions to find the right fit.