IFRS 17 Insurance Contracts
With in-depth technical knowledge and experience at a local, regional and global level, we have been assisting insurers in facing one of the most significant changes the industry has seen in several years.
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The actuary and IFRS 17
IFRS 17 Insurance Contracts
IFRS 17, which is now effective for reporting periods beginning on or after Jan. 1, 2023, represents an opportunity for collaboration between the actuarial and accounting functions to create accounting standards for the next generation. The current transformation of the insurance industry towards using increasingly complex models, analytics, IT resources and data sources increases the opportunity for insurers to benefit from IFRS implementation.
What is IFRS 17?
The International Financial Reporting Standard (IFRS) 17 is the first international IFRS Standard for insurance contracts. It provides consistent principles for all aspects of accounting for insurance contracts and removes any existing inconsistencies. It also standardizes insurance accounting at a global level to improve comparability, increase transparency and provide the information required to assess the impact of insurance contracts on the insurer’s financial position, financial performance, cash flows and risk exposure. This standard impacts the profit, equity, insurance liabilities and financial reports of insurers and their information technology (IT) models and structures.
The standard applies to companies who have:
- Insurance contracts, including re-insurance contracts issued
- Re-insurance contracts maintained by the organization
- Investment contracts with a voluntary participation feature, provided that the insurer also issues insurance contracts
Setting a new standard
With our global reach, Baker Tilly is able to assist insurers in applying the IFRS 17 standard and meeting the requirements through an integrated technical and timely framework. Our insurance industry specialists can assist your organization with the following activities:
Project management
- Implementation roadmap: Developing a detailed roadmap tailored to your organization for IFRS 17 transformation including a communication plan and stakeholder map
- Governance and oversight: Providing recommendations for project governance and oversight, tracking of implementation and transition project plan milestones and key priorities at both the Group level and local subsidiary/branch level
- Steering committee: Participating on IFRS 17 steering committees including dashboard monitoring of key milestones and status read-outs
Consulting and advisory services
Training: Training finance, accounting and actuarial staff, management and other users of the IFRS compliant financial statements. Such training would include overview and more detailed training of IFRS 17 subtopics and would be tailored to the needs of the users
Scoping: Assisting with local management for each country in which the organization has operations to help determine the scope of IFRS 17
Measurement model evaluation: Assisting management in determining which model valuation approach is appropriate based on the underlying nature of the insurance offerings such as the Premium Allocation Approach (PAA) versus the Building Blocks Approach (BBA), and how they apply for each significant insurance contract
Accounting policy changes: Assisting management with the development and review of white papers related to critical implementation decisions and accounting policy choices, transition opinions, interpretations, estimates and other key judgments associated with implementation
Internal controls and process changes: Designing and implementation of IFRS 17 process related changes including:
- Updating closing and reporting processes, actuarial processes and risk management
- The reassessment of internal controls over data, assumption changes and other inputs, monitoring controls, control considerations relating to temporary transition solutions and group considerations
- Planning, budgeting and forecasting processes
Organizational design: Recommending organizational design changes (changes to roles and responsibilities, in particular between the Actuarial and Finance functions) as a result of new requirements
Data and systems
- Technology assessment: Assessing technology needs and changes, including technology approach, vendor selection and data considerations
- Data requirements: Advising on optimal systems to meet new modelling and data requirements
- Key performance indicators (KPIs): Identifying changes to management information and KPIs used to communicate business and financial performance to internal and external stakeholders, during both the transition phase and after implementation
Reporting
- Disclosures: Assisting with applicable financial reporting disclosures including development of both the financial statements format as well as the additional accounting policy and other disclosures required
- Communications with stakeholders: Assisting with assessing the impact on and communication with key stakeholders, including the chief financial officer, internal audit, investors, analysts, supervisory bodies and regulators
To learn more about IFRS 17 and how Baker Tilly can help, contact our team today.
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