IFRS 17: Minimizing the risk of error
This paper examines what it means for the three lines of defense (development testing, validation, and audit) to work together on IFRS 17 implementation. Two common misconceptions are that they are three versions of the same activity and operate separately from each other.
We describe why both of these assumptions are incorrect, and focus on how the work of the second line, validation, serves as the linchpin that maximizes the value of the total effort.
Steps to get the most out of validation
To minimize the risk of error and maximize the use and cost of scarce resources, we encourage insurers to undertake the following initiatives early in their IFRS 17 development process:
- Develop a validation testplan. IFRS 17 is complex and the impact of an error could be significant. Building the validation on a generic chassis, like a standard playbook or sample validation report, is inadequate. Validation should use a testplan that incorporates IFRS 17’s specific features and requirements.
- Coordinate activity across model development, MRM and audit. The three lines of defense should work together in a non-duplicative way. Early planning is necessary to coordinate tasks across these groups.
- Use the testplan to inform development testing and deliver useful and useable information to the auditor. Validation and the validation testplan can form the linchpin that provides a comprehensive list of the required review work. It this way, validation can serve as an effective way to separate work across review activities and contribute to the timely and successful completion of IFRS 17 implementation.
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Contact us
Jules Krijgsman van Spangenberg
Actuarial Senior Manager , PwC Netherlands
Tel: +31 088 792 6711
