Toward IFRS 17 for Insurance Contracts

The IFRS 17 Accounting Standard, due to be implemented in 2021 will have a significant effect on the way that all insurers treat their asset and loss portfolios.

At Insureware we are working to ensure that our reserving and risk management products are fully adapted to the IFRS 17 specifications. Some of the requirements affecting non-life insurers are already incorporated into ICRFS™ data-handling and analytics content production. The remainder are due to come on line in ICRFS™ 2018 and its successor.

What is already available:

ICRFS™ model/forecasts project the full calendar period liability stream in distributional form and allows for fair value discounting.

Forecasting is scenario-based and allows for rapid recalculation of outcomes under alternative assumptions.

ICRFS™ Solvency II module computes a fully parameterisable market value margin (MVM) based risk charge and economic balance sheet for multiple lines under multiple scenarios, including correlation matrices. IFRS 17 mandates risk capital provisioning but does not specify a method for its calculation. There are several reasons why the Solvency II risk model is an excellent choice here, but alternatives can also be supported using the full power of ICRFS™ simulations.

Governance: When used on a network with a central server, ICRFS™ provides for rights assignment to users, who can either make no changes, changes only to models and forecasts, or changes to models, forecasts and data. The database administrator (DBA) assigns rights to each user in respect of each portfolio and also maintains an access log identifying all actions by users.

Coming in ICRFS™ 2018:

The IFRS paradigm makes a sharp distinction in the treatment of losses projected from expired and unexpired premium, that is losses resulting from events that have already occurred (even if not yet reported) and those that will result from events that have not yet occurred but which fall under active contracts. In non-life insurance this distinction mostly affects the current underwriting year. ICRFS™ forecasts are adapted to the grouping of contracts by underwriting year and can be spilt by the ratio of expired to total premium.

Governance: Restrictions on data access are further tightened by distinguishing between Primary Data, stored in its original form, typically unit record data, and alterable only by the DBA, and data for modelling, typically data arrays or triangles, which are assembled on the fly from primary data according to user-configurable filters.

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