Martin Sarjeant, global risk solutions leader at FIS, identifies the biggest issues affecting actuarial departments and explains how they will fundamentally change operations and systems.
How is the actuarial modelling world set to evolve?
Today's actuarial modelling teams are under considerable pressure to do more, at higher speeds and for lower costs. So, they need to not only streamline actuarial processes, through tools like workflow controls, but also get better at managing their data – the inputs to and outputs of actuarial calculations. Increasingly, cloud computing is giving them the flexibility to scale up to major actuarial modelling tasks while containing their costs. But in addition, actuaries need the operational agility to respond to new regulations like IFRS 17 and Principles-Based Reserving (PBR), as well as emerging new enhanced solvency regimes, and to deliver business value through greater insights into the business.
How will IFRS 17 affect insurers and actuarial reporting teams?
IFRS 17 will take effect in more than 100 countries at the same time, and so will have a big impact on the insurance world. As it will fundamentally change the way that insurers measure the profitability of insurance contracts and their overall performance, the regulation is likely to affect companies as a whole, as well as the way that actuarial systems and teams are managed and controlled. Insurers will need to ensure greater connectivity and auditability between actuarial and finance systems, and control and streamline the processes around the actuarial calculations that feed the general ledger. All of this will need to be done alongside existing calculations and, in many cases, in a fraction of the time currently taken to produce reported numbers.
To help our clients, we were very early to update Prophet in support of IFRS 17. In 2015, we incorporated the calculations outlined by the regulator's latest exposure draft into our solution and, in 2016, we issued further updates. In doing so, we made it very easy for our clients to "layer" the required IFRS 17 calculations alongside and on top of their existing models. And shortly after the regulation is finalised in May, we will issue a further update that mirrors any final changes.
We have also enhanced our governance solutions to support the connectivity between actuarial and finance and to improve audit and controls, as well as modernising both data management and workflow components. Our Prophet Control Centre solution will play a fundamental role in capturing end-to-end audit information and passing IFRS 17 results from the Prophet solution to the general ledger.
Will the work done to prepare for Solvency II help with IFRS 17?
Implementing IFRS 17 will be hardest for insurers that have not gone through a solvency modernisation programme like Solvency II. Firms that are still using older versions of actuarial software from the early 2000s will struggle, compared with those that invested in updating actuarial systems, models and governance solutions and who have robust control frameworks and processes in place.
Insurers are certainly looking to reuse elements of Solvency II calculations for IFRS 17 – for example, the risk margin under Solvency II is broadly equivalent to the risk adjustment under IFRS 17. But IFRS 17 can generally be thought of as adding an extra layer of calculations on top of your existing models and performing additional runs and reports.
Solvency II also helped insurers to improve their end-to-end governance, and the resulting enhancements will be completely reusable under IFRS 17.
Finally, Solvency II taught some hard lessons in project management as spending on additional resources in some cases spiralled out of control. For IFRS 17, there is an abundance of technology solutions and consultancy services available from solution providers such as FIS. These can help clients reduce the cost of implementation and achieve compliance while delivering increased business value – all without the need to increase expenditure significantly on staff.
What do clients value about your solution and services?
I believe our clients value our reputation and that we're responding to emerging regulations with innovative solutions. IFRS 17 is just one example but another would be PBR in the US. Our strategy to be the single platform of choice for actuarial and risk calculations is resonating with insurers globally across life, annuity, health, retirement and general insurance/property and casualty.
We understand the issues facing our clients, who see us as a strategic partner in times of change and transformation within our industry.
Companies:FIS Global
