RNA Analytics: Experience counts with IFRS 17
Ian Thomas and Neil Collins from RNA Analytics explain how their familiarity with implementing the accounting standard has helped the development of their modelling system
What do re/insurers need to consider when transitioning to and implementing IFRS 17?
Ian: From our experience of working with clients on IFRS 17, some of which are not subject to Solvency II, the standard involves not just accounting changes, but also impacts actuarial, data management and governance processes. The new regulation uses actuarial model cash flows at the very centre of the calculations and in doing so places new requirements upon the actuarial models and processes.
Managing the whole IFRS 17 project is creating high costs for insurers. There are also areas of the standard that are quite grey, and this has given rise to many questions on the interpretation. It is a principles-based standard where many of the topics will require judgement when implementing.
The number of runs required to test IFRS 17, along with understanding how insurers are getting liability movements from one year to the next, can be challenging. The increased volume of data due to the greater granularity requirements will stretch the capability of current system architectures. The standard will require IT, actuarial and finance departments to work together to align the data across multiple silos. This may not be easy or even possible with existing systems.
Do insurers recognise the value of IFRS 17?
Ian: For some insurers, I think the benefits are felt during the overall process. Thanks to IFRS 17, insurers will have to improve how they manage data and governance.
Implementing the standard brings the need to make a number of operational and technical changes. These changes can deliver significant business benefits, such as optimised systems and more efficient processes in the long run.
Companies moving fast will have access to the best resources in the market, however significant investment is needed to update accounting, actuarial, data and analytics systems. Connecting data, systems and personnel is key to achieving compliance and enabling future business transformation.
How can RNA Analytics help re/insurers with IFRS 17?
Ian: RNA Analytics offers IFRS 17 calculations including a mix of out-of-the-box standard code and template examples. The functionality includes portfolio-level balance sheet and profit-and-loss results, dynamic ALM best-estimate liability calculations, risk adjustment and the Contractual Service Margin, as well as the full end-to-end processing to assist insurers to rapidly develop their IFRS 17 compliance.
Our actuarial and technical consultants can provide assistance with a range of tasks to help, implement, refine and enhance the use of actuarial and risk-based tools. And we have assisted companies effectively with their systems gap analysis before they start on their IFRS 17 journey.
Our parent company is from South Korea, one of the first countries to start the implementation of IFRS 17. We can take advantage of the experiences gained from five large implementations of IFRS 17 with major insurance companies to effectively design and execute future projects.
Is RNA Analytics planning to launch any new services over the next year?
Neil: R³S version 3.0, which has just been released, enables users to write the model results directly to a database, reducing the amount of manual intervention in production environments and improving the overall processing time of a reporting period. It also introduced a source control system for model development, providing greater oversight and audit for changes in models.
Over the next year, we are looking to enhance our distribution capability, improve our end-to-end process and governance features and reduce model memory requirements, because actuarial models are becoming more complex with more data running through them.
Other software improvements happen continuously. Early next year, we are looking to release some standard code for modelling non-life business. Finally, we aim to maintain our IFRS 17, Solvency II and other model updates in line with regulatory developments.
Ian Thomas is an associate director, consulting, and Neil Collins is chief technology officer at RNA Analytics
Ian Thomas and Neil Collins
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