Finance and Actuarial co-operation essential for IFRS 17 compliance

In light of the introduction of new regulation for insurers such as IFRS 17, C-Level executives and senior leaders have come under increasing pressure to reduce the occurrence of a silo mentality prevalent within insurance firms and ensure increased communication and co-operation between finance and actuarial teams.

IFRS 17 has been the most complex insurance regulatory standard to date and as such there is a huge demand for insurers to find common ground internally whereby data and assumptions become transparent and shared, thereby making it easier to meet the requirements of senior stake holders and external regulators.

IFRS 17 has brought the need for significant business process change as increased data granularity and transparency (to calculate expected and actual cash flows) has placed extra pressure on finance and actuarial teams. Both areas should ideally use the same technology, data and processes for reporting yet due to sometimes conflicting objectives, there has historically been limited collaboration and inconsistent/incorrect results.

For insurers to navigate the major obstacles arising from regulatory change such as IFRS 17, they need to rethink and transform legacy operations and adopt a holistic, integrated approach to transformation with increased cooperation between finance and actuaries.

The end goal is a consistent, unified and controlled environment in which each area achieves their objectives starting from a foundation of common data sets, technology and architecture, governance models and processes.

The rewards will be more efficient, cost-effective compliance with increased regulatory demands, improved business insight and enhanced decision making. Granular data is needed to allow IFRS 17 compliancy by 2022 and will need to be collected from a wide range of sources and processed in new ways. Ultimately, this will require a greater need for collaboration and communication.

As insurers worldwide decide on their approach some have selected integrated solutions such as sub-ledgers to allow system integration, common data and processes adopted by finance and actuarial teams. This integrated approach should allow insurers to overcome the coming challenges more effectively.

However IFRS 17 is a principle based standard which is more complex than IFRS 4 and expected to cost more than Solvency II and it remains to be seen whether actuaries and finance teams will in practice work more closely or ultimately retreat into their silo mentalities and keep a safe distance from each other. The jury remains out.