Aptitude Software: Technology to simplify IFRS 17 compliance
Jeremy Marchant, head of international pre-sales at Aptitude Software, discusses post-Covid trends and explains some of the data challenges insurers are facing as they implement IFRS 17
You have been working with some of the top tier 1 insurers over the last two years and now some of your IFRS 17 projects are approaching the parallel run phase. What trends have you seen over that time?
We now have approximately a dozen clients implementing IFRS 17 and around half of those will have commenced user acceptance testing and/or parallel runs by early 2021.
Generally, it is the largest insurers who are further down the track with IFRS 17 projects, so the typical themes we are seeing at this point are around data sourcing and the integration of actuarial and financial data.
In terms of data sourcing, IFRS 17 requires new calculations, as well as new, granular data sets and groupings. This is particularly true for general insurers adopting the PAA approach, since under the current approach modelling is highly aggregated. However, GMM and VFA users have also faced the need to source all the required data, which is generally held in dispersed systems, and then structure it so the IFRS 17 calculations can be performed.
Many firms have found they do not have the data at the right level of detail and have needed to build new data allocation routines.
We've also noticed that the integration of actuarial and finance data has proven to be a big challenge. Translating actuarial model outputs and other cashflows into accounting concepts has been a major problem in the industry. Finance users typically have specific requirements in terms of the transparency and auditability of reportable numbers. Building this functionality has been an area where some projects have floundered in the last two years.
What Covid-19 impacts have you seen on IFRS 17 projects?
In the last few months, we have seen a genuine split across the market. Many of our tier 1 clients are moving beyond IFRS 17 to focus on finance transformation that will benefit the wider enterprise. We are talking about things like halving the time taken for month-end close, decommissioning legacy front-end systems to centralise functionality and automating reconciliations and controls. For example, some of our clients are targeting 40% of efficiency savings in finance over a two-year payback period.
In contrast, we are seeing smaller tier 2 and tier 3 insurers just coming to market and looking to leverage off-the-shelf solutions to minimise impact on their project teams. Quite naturally in the current environment they are seeking to conserve costs and capital with a focus on compliance-only projects, which retain the transformation option for a later date.
How can Aptitude Software help insurers implement IFRS 17?
We feel the biggest benefits our new clients get is learning from our existing clients. We have been implementing IFRS 17 projects for over two years and the Aptitude IFRS 17 Solution includes all the learnings from these engagements. This means our new clients will not be facing common IFRS 17 challenges for the first time.
At Aptitude, our product philosophy is built on the principle of configuration, not customisation. The Aptitude IFRS 17 Solution is, to a significant extent, pre-configured and works "out-of-the-box".
While there is some tailoring to do on-project to ensure all clients can address the requirements that are unique to them, we typically find that our projects are quicker to deliver than other vendors because of these accelerators – we're already on the second lap from day one of our projects.
Finally, we are well positioned to help those insurers with simpler business models who are expected to commence their IFRS 17 projects in the second half of 2020. What we hear from these insurers is they typically do not have large actuarial and accounting policy teams who have the time to get deep in the weeds on choices to be made under the new standard.
They are also not seeking immediate finance transformation objectives given other, more pressing, business priorities. The pre-built features and accelerators of the Aptitude solution are appealing to these sorts of insurers.
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