Written by Optimus in partnership with Valani Global, BDO and KR Consulting.
Many of our clients originally underestimated the work needed to comply with the standard. For most short-term business, the premium allocation approach (PAA) can be used and it generally gives bottom- line results similar to current practice.
However, even the simplest, monoline property and casualty insurers have realized there are significant complexities in practice. These include:
- Demonstrating PAA eligibility for contracts.
- Reinsurance and contracts that are not PAA eligible.
- Discounting and risk adjusting incurred but not reported (IBNR)/claims reserves.
- Aggregation-choice of IFRS 17 portfolios (by line of business, geography, risk profile, etc.) and groups within portfolios (onerous, non-onerous, may be onerous, etc.).
- Reporting transactions and profitability by underwriting year for each portfolio and group.
- Significantly increased disclosure requirements, and changes to financial reporting.
Here are a few of the key implementation realities that insurers are faced with as they seek to understand how their product features and mix will drive compliance with the standard:
- Analysis of all insurance contracts for PAA eligibility.
- Consideration of any features including experience rating, renewal options, etc.
- Assessment of non-PAA accounting and its impact for any longer duration contracts (such as construction or warranty contracts) and many types of reinsurance.
- Assessing the impact of different aggregation choices (IFRS 17 portfolios and groups)
- Assessing the criteria for determining onerous contracts or group.
- Adjusting IT and financial reporting systems to track groups of policies by many different criteria-year of issue, aggregation levels for onerous contract testing, and matching to specific reinsurance contracts.
Valani Global’s Services
Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.
Contact us for more information on our IFRS 17 Program.
Nazir Valani, President & Co-Foundernvalani@valaniglobal.com
+1.416.457.8622
Service Partners
With access to a global knowledge base and professional expertise, BDO offers extensive value to our clients across all segments of the insurance and financial services industry.
KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
One of the largest independently owned management consulting firms that works with organizations across North America & the Caribbean with a focus on Financial Services and Insurance Industries.