A better way forward on IFRS 17

How can Canadian insurers better manage new financial reporting rules while accelerating strategic outcomes?

Canadian insurance companies are now in their third quarter of reporting financial results under International Financial Reporting Standard (IFRS) 17, and many are continuing to adapt and evolve their practices and processes as they work through the changes the new requirements bring. While they’ve made significant progress, the experiences so far reveal a number of opportunities to make reporting faster, as well as more efficient and cost effective, while opening up new capacity to deliver the insights the business needs.

Canadian insurers’ IFRS 17 experiences so far

IFRS 17 has been a major change, requiring insurers to incorporate both actuarial and accounting data to calculate key figures like revenues in ways they didn’t have to do in the past. This is a significant adjustment for finance teams, especially when it comes to being able to fully interpret and explain the results to stakeholders such as the executive team, board members and investors. They also need to ensure the right data is flowing to their systems as well as implement comprehensive controls over the results produced.

To adapt to these changes and enable the transition, many Canadian insurers have moved to the cloud and implemented new systems and processes to perform financial calculations. But they’ve faced challenges, with some insurers, for example, still finding themselves having to perform manual workarounds of the results produced by their new systems. Many are still working out their new target operating model, and as responsibilities pass from interim IFRS 17 implementation teams with specialized expertise in the new accounting standard to regular operating units, knowledge gaps are emerging.

Execution time adds further challenges with finance teams pressed to perform the necessary calculations fast enough to allow for required reviews of the outputs ahead of regulatory deadlines. And with insurers still using manual processes to transfer data from old to new systems, IFRS 17 compliance is taking longer, costing more in people and resources and leading to questions from regulators about the results produced. The continued use of tools like spreadsheets also means more time and resources spent on auditing the results, while rising cloud costs add to the challenges faced by insurance companies navigating the transition.

A better way forward: automation, process mapping and a more flexible operating model

The good news is there are many solutions and approaches available to insurers to better understand and improve processes as they adapt and learn from implementing IFRS 17. These include:

Adopting emerging technologies that automate processes that are repeatedly performed, saving teams significant time and effort.
Reviewing working day timetables and work orchestration to uncover where finance teams should focus initiatives, such as new automation tools, to reduce time spent.
Building systems more suited to IFRS 17 requirements while incorporating a more flexible, future-forward operating model that helps finance teams more easily adapt to new requirements that emerge.

This last point is key as insurers’ finance functions face added constraints on time and capacity not only due to requirements under IFRS 17 but also from new demands and expectations in other areas. Finance teams will need to have resources available, for example, to do their part in helping insurers work through evolving environmental, social and governance (ESG) rules. They’ll also play a key role in navigating the finalized guideline from the Office of the Superintendent of Financial Institutions setting out new internal and external assurance requirements for regulatory returns.

And by creating capacity, insurers’ finance functions can also position themselves to produce the insights and analytics the business needs. This is especially powerful in the context of IFRS 17, which by enabling insurers to look at their data at a more granular level, opens up new opportunities to make more informed decisions based on business performance. Accessing deeper data about the performance of insurance contracts would help them make better decisions about pricing, for example.

Creating a strategic advantage through the IFRS 17 journey

The opportunity now is to use the IFRS 17 journey as an opportunity to create a strategic advantage for the organization, not only by improving processes and adopting technology but also by building a stronger, more insights-driven business overall. But with a limited pool of talent with deep knowledge and understanding of IFRS 17 and finance teams stretched to capacity, this is also a good time to look at how working with the right partner can help.

At PwC Canada, we’ve developed what we call the next generation of managed services, including offerings specific to IFRS 17, that go beyond traditional outsourcing by helping companies continuously improve their businesses. We combine our IFRS 17 solution, which we’ve tested against more than 500 cases, with the expertise of teams of actuaries and accountants who bring strong knowledge of new financial reporting requirements and significant experience helping insurance companies improve processes and meet their reporting deadlines ahead of time. Through our managed services, insurers get access to our IFRS 17 accelerators and tools to further increase efficiencies, which opens up capacity for them to focus on their core business activities and priorities.

When insurers use our IFRS 17 managed services, we can act as the appointed actuary, which creates even more efficiencies in the process. We’re also able to take the IFRS 17 data and integrate the results into regulatory returns and build dashboards providing the insights insurers need. Other benefits include help with managing rising cloud costs, software upgrades and regression testing, as well as our ability to quickly incorporate the latest regulatory updates into financial disclosure tools and, in turn, allow for more seamless reporting by insurers.

We’re proud of the very smooth experiences insurers who work with us have had during the first two quarters of reporting under IFRS 17.

To learn about how our efforts to continually streamline and automate IFRS 17 reporting and compliance can help you ensure a more cost-effective transition and create a strategic advantage for your business, contact us any time.