Back to Systemorph IFRS 17
Compliance Series

Managing IFRS 17 P&L: 3 Questions to Answer to Give Immediate Insights for Steering

While many implementation programs are busy keeping a number of parallel workstreams running, the most pressing strategic need for CFOs is to gain first-hand insights on P&L volatility under real world conditions now.

IFRS 17 is driving a transformation in how insurers report financial results but also how they manage the underlying data for those results.

That means it is critical to understand as early as possible how real-world data will affect your models, data gathering, analysis and reporting process.

Here are three health checks that will show whether your IFRS reporting process program is heading in the right direction, or whether you must adjust course now to avoid these unpleasant surprises when you run out of time to steer your first IFRS 17 publication:

1. Have you produced a real world P&L by now?

If you have not, getting prepared for a dry run and parallel runs of your data gathering, aggregation, analysis and reporting process by 2021 might be challenging. While you might decide to skip parallel runs, this could leave you completely unprepared when it comes to understanding and managing P&L volatility under IFRS 17/9.

Our clients are producing actual figures now based on real-world data and so they are discovering the finer details of how to calibrate their unit of accounts, coverage units and measurement methodology such as BBA, PAA and most importantly the Variable Fee Approach methodology. Producing a wish list of required KPIs is certainly an important task, but understanding those figures based on actual liability cashflows and asset data is key. In other words, the only way to truly validate your choices of model and methodology and processes to support them is to run them with real-world data.

If you are still focusing on getting your IFRS 17 solution up and running, here are some examples of real-world data from our clients that underscore the point. You need to start calibrating your ALM and balance management sooner rather than later.

The sample figures show that even insurers with a finely tuned Life Insurance business will experience severe volatility from adopting the IFRS 17 reporting requirements, especially from interest rate effects. Those effects, if not well understand now, risk causing your P&L to become uncontrollable under the new accounting regime:

Interest rate effects over reporting period in %

2. How will you steer your business in the IFRS 17 world?

It is tempting to focus on a minimal compliance solution to satisfy the bare sets of minimal disclosures. However, even a superficial understanding of P&L drivers at group level requires deep drill downs into your IFRS 17 engine.

Think about mutualization and the definition of unit of account. If you take advantage of mutualization you can produce figures on a higher level of aggregation. However, once you start to analyze the drivers of your results across several dimensions (Line of Business, Distribution Channels, Reporting Unit, management view of your business…) you immediately need to be able to drill down to real-time analysis and aggregation at multiple layers and manipulate a chain of underlying data elements swiftly.

3. Are you addressing the CFO’s need for a cost efficient yet nimble implementation?

Fundamentally your IFRS 17 end-to-end solution needs to provide you with the flexibility to access any slice of your underlying input and results data based on your KPI and reporting wish list.

Implementing this in a brute force manner means to scope it all out beforehand, anticipate a fixed set of reporting KPIs and then implement them. In other words, you are setting the parameters in stone.

However, if your IFRS 17 solution does permit you to start using data immediately, your calibration exercise will start too late to be ready to publish your IFRS 17 figures with confidence.

At Systemorph we put a revolutionary data management solution at the heart of our IFRS 17 end-to-end reporting engine. This way everyone involved in insurance data management – actuaries, accountants and controllers – can let their creativity play at a one-stop shop.

Imagine if you had to conduct data integration and mapping exercises between different systems, only to run a new urgently required report. The Systemorph Vertex platform enables you to be up and running with real-world data and delivering immediate results in weeks, but with the flexibility and confidence to use the data to drive your business.

The platform’s powerful data management features permit you to drill down from reports to data inputs at every level, allowing stress testing, sensitivity analysis and insights for P&L steering into the future.

Contact us to learn more how we can help you meeting your reporting needs today.