delivering ifrs 17 efficiency for p&c insurers...q1 2019 onwards –pocs selected client trials:...

willistowerswatson.com

ResQ Financial Reporter

Implementing IFRS 17

16 May 2019

Delivering IFRS 17 efficiency for P&C insurers

© 2019 Willis Towers Watson. All rights reserved.


© 2019 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.2

Agenda

1 IFRS 17 Background

2 IFRS 17 Target Operating Model

3 ResQ Financial Reporter

4 Demo and Key Benefits

5 Conclusion

6 Questions


1. IFRS 17 Background

© 2019 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 3


IFRS 17 Background – The BasicsCommon global standard for reporting to investors, not regulators


Global* accounting standard covering

insurance contracts with a consistent

measurement basis

General purpose financial reporting to meet

needs of investors and creditors

Not designed to meet requirements of

supervisors/regulators

Who

Any entity which issues insurance contracts and

reports under IFRS

May be mandated by (inter)national legislation

(eg listed entities in EU or insurance entities in some

jurisdictions)

Entities may opt to publish under IFRS alongside

national GAAP accounts

Subsidiaries of such entities will need to report

internally under IFRS (via reporting pack or similar

simplified mechanism)

Many large entities (particularly unlisted) will

continue to use local GAAP

US entities will report under US GAAP as now

What


IFRS 17 Background - Market ProgressMost that are directly affected are in the design and implementation stage, after completing a gap

analysis and impact assessment


Companies are not consistent in their progress – depends on own situation

Monitoring progress:

Design and Implementation:

Gap analysis and impact assessments:

Dry runs:

Very few companies are at this stage yet

Larger global companies

Regional variation

Varied approaches including full Finance rebuild, piecemeal additions to existing systems

Most are looking for external software solutions

May be a Finance-based, actuarial-based or combined solution

Increased cooperation between Actuarial and Finance required

Smaller companies

Companies indirectly affected

Some companies not directly affected are considering IFRS 17 to ensure comparability to peers

Those expecting it to apply at some point are also starting out

Those not directly affected e.g. US and some UK companies


IFRS17 Background - Key Concepts

6© 2019 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.

The operating system design needs to be flexible for usage under

IFRS 17 to allow smooth transition and limit additional workloads

Some new concepts but similar principles of calculation

Cash flows

and discount

rates

Contractual

service

margin

Reporting

and

disclosure

requirements

Portfolio definition

and contract

boundaries

Onerous

contracts

Risk

adjustment


IFRS 17 Background – Implementation

Key Challenges

Additional data granularity and data Storage

Assessment of grouping / cohorts

Identification of onerous contracts

Risk Adjustment – assessment and allocations

Possible changes to best estimate reserving process

Allocation of best estimate reserves to grouping / cohorts and

onerous / not onerous / other

PAA or GMM

Estimation of liability for incurred claims and liability for remaining

coverage

Separate assessment of outwards reinsurance

Calculation and earn out of CSM (GMM only)

Discounting and setting of discount rates (inception, previous

periods, current period, when incurred claims)

Transition

Roll forwards

Reporting – disclosures / reconciliations and dashboards

Uncertainty over final form and interpretation of the Standard

Timescales and governance


Impact Assessment – Key Findings

• Data – e.g. granularity for groupings

assessment of groupings

• The amount of information that needs to

be stored and carried forward through the

years

• Timeframes and costs

• Process and system changes

• IFRS 17 pushing need for new or updated

Target Operating Models (TOMs)


2. IFRS 17 Target Operating Model



Example IFRS 17 Target Operating Model


End-to-End reporting solution for P&C Insurers

Need for transformation or refinement of actuarial and finance target operating model (TOM)

Requirement for the design and implementation of a flexible reserving environment for IFRS 17, Solvency II and other reporting

requirements

Actuarial processes will move further into the finance processes

Implementation using Unify, ResQ and ResQ Financial Reporter

ResQ is a market leading reserving tool used to produce best estimate reserves, cashflow patterns and parameterise other key

assumptions

ResQ Financial Reporter provides an IFRS 17 engine that is fully integrated with best estimate reserving process

Orchestration and automation of the entire process with Unify, including the interfaces between Actuarial and Finance systems

within the Unify framework, ensure governance, stability and speed

Design and Implementation


3. ResQ Financial Reporter



Key functionality


Allocations module to support

transformation of reserves,

patterns and risk adjustment to

different levels of granularity or to

different bases

Production of information required for reporting and key business decisions including

disclosures and diagnostics to support the validation of the estimates

Flexible data import and

export to allow ease of

integration with data and

financial systems

Fully integrated with

Unify, our workflow

management solution to enable

rapid production of reporting

process in a secure and

transparent environment

IFRS 17 calculation engine for P&C

insurers using both general

measurement model (GMM)

and simplified (PAA) model

ResQ Financial

Reporter

Part of our market leading ResQ reserving

toolkit with the flexibility to use as a

standalone solution


What ResQ FR generates…


12

3

4

The model generates all the data needed by the

Standard at the granularity required by the user…

…and organises the data points in a way

which follows the logic of the standard…

…and then opens up the black-box to

show the calculation components.


What ResQ FR presents…


The outputs of the model are mapped

and presented in a way which is

consistent with:

the original IASB IFRS effects

analysis;

the emerging market consensus

on the format of the IFRS 17

Financial Statements.


How ResQ FR integrates with accounting process…


ResQ FR has the granularity and

flexibility required to service all the

IFRS 17 related disclosures

required for external reporting.

Additionally, the functionality of its

Reporting db allows the

interrogation and presentation of

this granularity in the ways needed

to support internal reporting and

analysis – using Excel, Power BI or

similar tools.

For clients using an Accounting

Rules Engine or a Data Store,

ResQ FR will output straight to the

Target Value Table – and for those

using a SAP GL (and the SAP

Finance and Risk Data Model) or

an Oracle GL (and ‘Oracle

Accounting Hub).

The model is pre-mapped to a pro-

forma set of IFRS 17 accounts and

disclosures as a starting point.

The additional mapping required to

integrate with client-specific Charts

of Accounts is therefore greatly

reduced.

Internal and External reportingPassing the output through to the

General Ledger (GL)Pre-mapping in the model


Storing multiple runs at full granularity in a

format that allows ‘slice and dice’ capability

Providing the diagnostic functionality to

better understand and explain the results

and movements before they are released to

the core accounting systems.

Giving the ability to ‘Sandpit’ - comparing

scenarios and optimising input parameters,

including the support for Strategic Planning.

Reporting

database*

*stand alone or integrated with client database

Multiple model runs

and ‘What if’?’

scenarios generated

How ResQ FR helps to understand and optimise results…


ResQ FR

Core

Accounting

Systems

Mapping transformation

and ‘releasing’ of the

data

Passing the finalised data to the core

accounting systems – controlled, reconciled,

and auditable.


4. Demo and Key Benefits



DEMO

Demo


ResQ Financial Reporter: Features Roadmap and Timelines


Client demo available in

cloud environment

Partner programme for

selected clients

Early adopter discounts

available to 30 June 2019

Q1 2019 onwards – PoCs

Selected client trials: April

2019 onwards

March 2019: ResQ

Financial Reporter Beta

release

Q3 2019: ResQ Financial

Reporter General

Availability release

Incorporated in Q1 2019

Assumptions management tool

Reinsurance (held and issued)

Roll forwards

ResQ COM API and partial Unify integration

In progress

Interim reporting

Disaggregation of Insurance Finance Income and Expense between

Profit or Loss and OCI for PAA

Risk Adjustment allocations

Yield curve management

Finalise in 2019

Further Unify integration

Build out management information and diagnostics

Extended reporting

Enhanced allocations methodologies

Financial planning

SII Technical Provisions

On-going testing and user experience improvements

ResQ Financial Reporter: Features and timelines Testing and roll out

Note: Timelines are indicative and may change as a result of changing priorities, client feedback and testing procedures


Closeness of best estimate and assumption generation (including cashflows) to CSM and IFRS 17

measurement models

Flexible implementation model with ability to integrate ResQ Financial Reporter fully in to end to

end target operating models for financial reporting

Ease of generation of many inputs, parameters and assumptions from core reserve analysis

Ability to transform reserves, patterns and risk adjustment to different levels of granularity or bases,

recognizing that the required level of aggregation under IFRS 17 may not align with current internal

segmentation for reserving.

Calculation and comparison of both PAA and GMM methods

Generic professional software that will keep up with evolution of the market standard

Ability to produce cashflows, detailed reconciliations and insurance contract liabilities to feed

different stages of the IFRS 17 process (including alternative CSM engines, subledgers and general

ledgers)

Detailed and flexible outputs mapped to IASB Taxonomy and a default Chart of Accounts (CoA)

with the ability to further map to client specific CoAs and to generate journal postings

Modular approach to fit a broad variety of different implementation models

Potential future use as a financial planning tool


Key Benefits


5. Conclusion




IFRS 17 Conclusions

IFRS 17 is still a moving feast

BAU will force closer integration between actuarial and finance teams. Fast

efficient processes will be key for successful implementations

Focus on the interpretation of the numbers will necessitate strong

automation of ancillary processes

Governance will need to be extremely strong to support

the population of Financial Statements


6. Questions


ResQ Financial Reporter

Please contact:

Andy Teale

0044 7966 968997

[email protected]

Tina Gwilliam

001 571 606 9952

[email protected]

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