FIS: Unlocking IFRS 17 and LDTI
Martin Sarjeant, head of insurance risk solutions management and strategy at FIS, reviews the challenges posed by the new IFRS 17 accounting standard and its US counterpart, long-duration targeted improvements (LDTI)
How are IFRS 17 and LDTI challenging re/insurers?
For both accounting changes, data is a major issue – both in terms of getting the right level of granularity, and the availability of the data.
LDTI is really an extension of US GAAP, which has been around for a long time. All US insurers are reporting on US GAAP already, but with LDTI, there are some fundamental changes to how they make the calculations. By comparison, IFRS 17 is a whole new reporting standard.
From a vendor viewpoint, we use a very similar technique to support calculations at the group level for LDTI US GAAP and IFRS 17.
How can FIS help re/insurers with IFRS 17 and other aspects of insurance risk management?
We provide a full end-to-end automated offering spanning all re/insurers’ actuarial and accounting needs. With the extension of our Enterprise Accounting Solution (EAS), we are probably one of the only vendors that offers a full end-to-end solution from the sourcing of data to the posting of results and production of the financial statement.
We have a very mature offering, particularly for IFRS 17; we released our first solution for the standard a month after it was published.
As the clock is ticking towards the implementation deadline for both accountancy changes, some insurers do not have the luxury of replacing their systems. When that is the case, firms can layer our IFRS 17 or LDTI solution onto their own existing solution, where the two can work together.
Is FIS planning to launch new services, or enter any new markets?
We have been continuing to fine-tune our managed cloud service. We launched it five years ago and we have focused on improving the delivery model and reducing costs.
We are also launching new offerings in the cloud for smaller insurers, to enable them to implement cloud-native technologies and drive down their total cost of ownership.
We have also launched significant technology updates in July for our platforms, with a focus on providing more flexible results. We now offer a product called Prophet Enterprise Velocity Edition, which gives clients access to Intel’s AVX technology to enable considerably faster run-times.
In addition, we re-engineered our results and results storage so that it can use distributed data technology.
Together with our cloud technology, that step change in speed transforms the end-user experience.
Over the next year, we will be increasingly focused on connectivity and our Application Programming Interfaces (APIs) alongside our workflow tools, to integrate with other applications that insurers may have to enable full automation of the end to end process.
In addition to IFRS 17, our platform is used for hedging, asset liability modelling, capital standards and Solvency II, as well as managing market and operational risk.
Do you understand why many insurers are critical of IFRS 17 and do not see value in it?
I agree some insurers have been critical in the past in terms of the cost of compliance vs the benefits IFRS 17 brings. I do believe this is changing and will change when the standard is live.
IFRS 17 brings many benefits, such as properly valuing the insurance contracts on a market value basis, delivering a truer reflection of profits, near global consistency, better governance, greater protection for policyholders, investor confidence and transparency. These are just some of the benefits of IFRS 17.
I believe the benefits above will not only help drive more investment in the insurance sector, but globally it will increase insurance penetration levels, particularly in emerging markets, and increase insurers’ financial strength.
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