Insurance companies have no shortage of compliance rules and regulations to keep up with these days. In my last blog, I talked about ESG requirements and the importance of agility to keep pace with demand and emerging policies. Another at the top of the list of priorities for insurers is IFRS 17.
IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017 and is set to replace IFRS 4 on accounting for insurance contracts in January 2023. The US is one of the few countries that has decided not to adopt IFRS 17. As a result, many global insurers are managing the parallel implementation of the Long Duration Targeted Improvements (LDTI)—the US GAAP analog of IFRS 17, which also has a January 2023 effective date. So what does all of this mean for insurers?
Under the IFRS 17 model, insurance contract liabilities will be calculated as the present value of future insurance cash flows with a provision for risk. The discount rate will reflect current interest rates. The benefit of the new rule is to provide a better view of the value of an insurer and the comparability between them. IFRS 17 not only affects accounting and financial reporting, but it may impact the overall financial direction of insurers because there is the potential to influence product development, core processes, incentives, and more.
The processes required to create and consolidate these IFRS 17 reports are very complex, specific to each organization, and subject to change. IFRS 17 could cost global insurers between $15 billion and $20 billion when all is said and done. The new regulation puts enormous pressure on existing finance and accounting processes at insurers and will be very difficult to comply with without automation and orchestration.
Preparations for IFRS 17 are already complete at 37% of companies. About one-third, however, say their companies are only somewhat far along or just getting started in preparing to make the transition, according to Deloitte.
To streamline operations and ensure compliance with IFRS 17, insurers need seamlessly integrated systems and automation functionality. A unified low-code platform can support the sophisticated task management that will be required and automation of complex processes that could involve thousands of discrete tasks. Commercial out-of-the-box solutions do not have the flexibility to coordinate, manage, and control these processes due to their rigid structure and lack of automation capabilities.
Forward-thinking insurers will use this opportunity to make holistic changes in how they approach compliance and finance and accounting processing going forward. Low-code offers insurers a solution for reporting in a complex and changing regulatory environment that includes:
Get more detail on the benefits low-code brings to IFRS 17 compliance and how you can easily meet new requirements as the insurance industry continues to become more regulated.