The challenges with IFRS17 are many but the real value is its ability to create a uniform reporting standard for all insurers.

If you’ve read this post from Louise Cooke, you’re likely aware of some of the challenges of getting standard accounting software to comply with IFRS17, as well as using the Baseline Delta Approach. In this post, I’ll suggest the ways in which IFRS17 will make the insurance industry more competitive by mandating a standard that levels the competitive field for insurance companies with unified financial statements.

A Brief History

The push toward IFRS17 began in 2001 when the International Accounting Standards Committee (IASC ) submitted a detailed review of accounting for insurance contracts to the International Accounting Standards Board (IASB). The final standard, IFRS17, was published in May of 2017. In June of 2019, related documents — Exposure Draft: Amendments to IFRS 17 — were published, with the intent to ease implementation of the standard by reducing its implementation costs and making its financial statements easier to explain. IFRS17 will be fully effective in January of 2022. 

The challenge for insurers is to transform their IT landscapes to produce IFRS17-compliant financial statements in time. Such transformations require substantial implementation projects that will impact insurers’ infrastructures, as well as daily workflows across their organizations. Unless there is a better way… 

Functional Specification: The Devil is in the Details

Reading IFRS17 won’t provide all the functional answers to insurers’ operational questions. For example: 

• How detailed do disclosures have to be?
• Is available data detailed enough to fulfill the requirements?
• To what extent can data be grouped, aggregated, or mapped meet disclosure requirements? 

Answering those questions and others is the advantage of implementing pre-configured IFRS17 compliant software, as compared to rolling the dice and expending the resources to develop it in-house. In fact, the business content within SAP S/4HANA Financial Products Subledger (FPSL) includes: 

• Pre-configured policy templates
• IFRS17 calculations according to the three main approaches
  • GMM General Model Measurement
  • PAA Premium Allocation Approach
  • VFA Variable Fee Approach
• Subledger bookings 

Pre-configured software allows insurers to adapt the software to their business processes, rather than distracting resources from daily operations and pulling people offline for development projects. 

Full Disclosure 

The disclosure requirements of IFRS17 will make financial statements comparable across insurance companies. Its consistency, uniformity, and principle-based accounting will ensure a common, high-quality standard. And a level, competitive playing field will give insurers plenty of room to run. 

If you’re not ready to comply with the disclosure and other requirements of IFRS17, we can help. For more information on our pre-configured solution please click here SAP S/4HANA for Financial Products Subledger or contact me at the email address below so I can establish contact to the right experts.