IFRS 17 is a new accounting paradigm for insurers requiring significant changes to accounting treatments. Unlike Solvency II and other insurance regulations before it, IFRS 17 compliance requires a much greater degree of collaboration between actuaries, risk managers and accountants as the calculations must be based on a comparison of both expected and actual cash flows.
While initially there was a general perception that the IFRS 17 insurance standard could be handled within the actuarial systems, the complexities of IFRS 17 have crystalized and now the focus is on determining where the handoff point is between the actuarial and accounting departments.
Brian Heale, IFRS 17 Subject Matter Expert at Aptitude Software, provides a detailed look at the typical capabilities of actuarial and accounting systems with regards to IFRS 17. By looking at the variety of IFRS 17 requirements, Brian outlines how insurers can determine the potential delineation between the actuarial and accounting systems and use each appropriately.
Some of the topics covered by this paper include:
- The difference between an Actuarial CSM and an Accounting CSM – and why an accounting CSM is critical.
- 10 complex requirements not typically undertaken in the actuarial environment that can be met by a subledger accounting approach including support for multi-currency, reconciliations and more.
- Diagram of a typical business flow for required for IFRS 17.
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The need to store the results of contract performance measurements at each measurement period and provide a fully auditable process as the calculation changes over time.
Determining the handoff between the actuarial systems and accounting systems will be a key decision for insurers. It’s important that project teams understand the actuarial and accounting requirements and system capabilities and how they differ in order to ensure they can successfully adopt IFRS 17.
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