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South African insurers when implementing IFRS 17

Dewald van den Berg Partner, PwC South Africa February 18, 2021

Estimated reading time: 3 minutes

“50% of respondents to the latest PwC South African IFRS 17 survey say the integration of technology solutions is by far the most common challenge being faced by insurers.” 

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South African insurers have all started their IFRS 17 programme plans in earnest and, with IFRS 17 delayed to 2023, some have taken time to review their decisions. Companies that made an early start to their implementation journey are mostly developing solutions in-house or reusing existing solutions — driven by the lack of vendor-solution maturity at the time they were ready to commence detailed design and build of systems. Those that have waited for the dust to settle are looking at vendor solutions to meet the complex requirements of IFRS 17, notably for determining the contractual service margin (CSM), the IFRS 17 subledger and for disclosure reporting tools. 

Finance functions already face many challenges, which IFRS 17 will further strain: 

  • Finance functions in insurance organisations are already strained due to the voluminous data flows in order to produce IFRS financial statement reporting, SAM regulatory reporting, and adjusted IFRS numbers for tax compliance.
  • IFRS 17 may cause further disruption to reporting calendar obligations as a result of the new metrics required and the myriad of additional disclosures — including granular, multidimensional reconciliations, and potentially updated KPIs.
  • Unsophisticated finance reporting systems and manual processes are being used to support reporting for statutory and internal purposes. The demands of IFRS 17 will make it even more challenging to maintain effective controls.
  • The lack of an insurance subledger, which is controlled by finance, places greater reliance on policy administration vendors. Existing service level agreements may limit timely changes to produce the appropriate level of data.
  • Current processes and handovers between actuarial and finance departments may pose challenges to accommodating the increase in dependencies between these areas. Having a wider geographical presence also adds to the challenge to produce standardised consolidated reporting. 
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As finance executives navigate the IFRS 17 implementation roadmap, some areas will require careful consideration:

  • Many organisations face legacy system challenges. Defining a standardised data model and data architecture to enable consistent understanding of data and results, and management of data quality, is key. The granularity and volume of data required for measuring insurance contracts under IFRS 17 should not be underestimated.
  • Defining a high-level architecture and quickly landing key design decisions. This is important to enabling the detailed design of solutions to accelerate implementation.
  • Designing a chart of accounts based on stand-alone and group wide disclosures. This should be able to cater not only for IFRS 17, but also management information and allow for customisation without impacting group disclosures.
  • Evaluating central solutions to service multiple business units such as an insurance subledger, thereby enabling granular contract and product accounting and ‘decoupling’ accounting rules from the legacy policy administration systems.
  • Defining a target reporting calendar across the delivery model and overlaying processes that identify suppliers of information, users of that information, control activities as well as the critical path. This will allow insurers to flex timelines and assess the impact on downstream processes.

Based on our survey findings, I consider South African insurers to fall into two IFRS 17 maturity camps. Their 2021 will look very different. Those who are well advanced will start testing solutions and parallel run reporting processes to make sense of the numbers. They will be able to focus on their transition efforts for producing the opening balance sheet.

Those that are still in the design phase will need to urgently complete the design and start building. Meanwhile, those who indicated that they haven’t started yet will need to take immediate action. Any further delay could seriously compromise any IFRS 17 solution implementation. 

 

Contact us

Dewald van den Berg

Dewald van den Berg

Partner, PwC South Africa

Tel: +27 (0)11 797 5828

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