IFRS 17

Gearing up for the new IFRS

IFRS 17: Insurance contracts

IFRS 17 was released in May 2017 and it is a comprehensive standard. The standard replaces IFRS 4 (Insurance Contracts) – an interim standard – which currently permits a wide variety of practices.

If we take a look at various insurance contracts around the world, we would find that they are accounted for using different measurement frameworks. What the new standard does is that it tries to achieve a consistent insurance accounting framework. A fundamental shift might be required in the way in which data is collected, stored and analysed, changing the emphasis from a prospective to a retrospective basis of analysis and introducing a more granular level of measurement and additional disclosures. Consequently, IFRS 17 will fundamentally change the accounting for all entities that issue contracts within the scope of the standard for insurance contracts. When implementing the new standard of IFRS 17, it involves many stakeholders well beyond actuarial, accounting and finance function, where there are a number of decisions and choices to be made.

 

How PwC can help

Workshops

The introduction of IFRS17 will lead to significant changes across the business. The workshop sessions will help to:

  • Align key stakeholders across the main business units on the technical aspects of reporting under a new standard.
  • Ensure that key stakeholders are making decisions based on a sound understanding of the IFRS17 principles.
  • Provide your team the grounding for next steps, including the gap analysis and determine the transition project plan.

 

Gap analysis

By analysing the gaps between your current process of financial reporting and a process under the new standard, you will have:

  • An indication of the areas that are going to be most affected from your current IFRS reporting.  This will consider;
    • The major data gaps / system that are likely to exists
    • The differences from your current accounting policies and methodologies to  IFRS17 for key products
    • The gap between the processes that will be needed for IFRS17 and your current processes. It includes an assessment that measure the current readiness and help you to set priority for change in key areas in scope.
  • An estimation of resources required for the future project.
  • A key input to understanding the deeper systems impact.

 

Financial impact assessment

The financial impact assessment will help you to:

  • Gain deep understanding of the scope and measurement models introduced by the new standard – IFRS 17.
  • Acknowledge the key concepts of the measurement models such as coverage units (CU), level of aggregation, risk adjustment, and PAA eligibility.
  • Identify high priority products, measurement model, and analyse develop profit signatures and its volatility.
  • Build up understanding of where IFRS 17 is likely to materially different from ADD’s current accounting.
  • Derive the baseline input for your future multi-year integrated IFRS 17 implementation plan.

 

Technical design

After understanding the result from the performed impact assessment and the gap between what your company has and what is needed, the next challenge would be on making the leap to the implementation stage in the near future. You might be wrestling with how to start this long-term IFRS 17 implementation project – this is where the technical design stage comes into play as it sets the foundation for the other phases towards implementation stage.

During this phase, we will work with you to provide industry knowledge about how your peers are planning to account for their business, produce new charts of accounts and disclosure requirements, evaluate the target operating model, and design the likely analyst packs and communications. Our insurance experts will partner with you to help you understand the areas to focus on when designing your underlying systems architecture.

To succeed in these endeavors, we advocate taking a “soft design” approach which introduces a flexible way of working following three well-established principles.

Transition

The new standard requires insurers to restate their opening balance sheet to reflect their existing business. This one-off exercise should not be overlooked. For life companies this is a critical component of P&L for next ten plus years. PwC can support you with the design and implementation of the opening balance sheet and advise you on how to convert your existing processes to your target financial architecture, using existing data in the most effective way.

 

Integration

PwC will work with you to ensure a smooth transition when implementing the new systems architecture and processes. This implementation will cover:

  • Systems and infrastructure: Design the most efficient end state to accommodate the additional requirement of IFRS 17.
  • Data: Develop an information model and a robust data framework which will enable the transition to and ongoing management of new standards, which includes data preparation and cleansing.
  • Organizational design: Design and implement the target operating model. Develop a framework which allows effective coordination between finance, actuarial, capital, and risk management.
  • Process and controls: Design and implement the end to end process, controls  and dependencies required to achieve compliance, as well as enhancing your control framework to identify any bottlenecks or risks and breaches while ensuring the consistency and quality of the information provided.

We will also help you in different review activities such as post implementation review and remediation, internal audit review and external audit review.

 

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Contact us

Djohan Pinnarwan

Partner, PwC Indonesia

Tel: +62 21 509 92901

David Wake

Advisor, PwC Indonesia

Tel: +62 21 509 92901

Sam Flitman

Advisor, PwC Indonesia

Tel: +62 21 509 92901

Herry Setiadie

Director, PwC Indonesia

Tel: +62 21 509 92901

Dwi Jayanti

Senior Manager, PwC Indonesia

Tel: +62 21 509 92901

Ivina Hartopo

Senior Manager, PwC Indonesia

Tel: +62 21 509 92901

Nathania Hartalim

Manager, PwC Indonesia

Tel: +62 21 509 92901

Marcella Aliguna

Manager, PwC Indonesia

Tel: +62 21 509 92901

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