THE IFRS 17 GUIDE:

ON THE JOURNEY TO COMPLIANCE

 ALONG THE WAY
Accounting considerations
Access the right data
PREPARATION FOR Define an IFRS 17 Chart of Accounts
THE JOURNEY Determine an approach
Building your team Stronger linkages between actuarial
Budget and timeline and finance
Common IFRS 17 challenges Financial calculations and volatility
Project goals Value from compliance

THE IFRS 17 LANDSCAPE

Current state of the industry
Our IFRS 17 journey
Our stops along the way
 CONTENTS
THE IFRS 17 LANDSCAPE................................................4
Current state of the industry............................................5
Our IFRS 17 journey...........................................................6
Our stops along the way...................................................7

PREPARATION FOR THE JOURNEY........................... 8-9

5 THINGS TO CONSIDER
Building your team..................................................... 10-11
Budget and timeline................................................... 12-13
Common IFRS 17 challenges.........................................14
Project goals......................................................................15

ALONG THE WAY.............................................................16

Accounting considerations.............................................. 17
Access the right data.......................................................18
Define an IFRS 17 Chart of Accounts........................19-20
Determine an approach.....................................................21
Stronger linkages between actuarial and finance.........22
Financial calculations and volatility.................................23
Value from compliance....................................................24

5 THINGS TO CONSIDER..........................................26-33

FINAL THOUGHTS.....................................................34-35

FINAL THOUGHTS ADDITIONAL RESOURCES.......................................36-39

4 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE

THE IFRS 17 LANDSCAPE

 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE 5

2018 is the year of

reckoning for insurance
IFRS 17 is challenging an industry already facing market
pressures after years of underinvesting in technology.

SIGNIFICANT M&A ACTIVITY REGULATORY CHANGE

After a decade of significant M&A Large scale efforts like Solvency II and
activity in the insurance sector, systems IFRS 9 have already sapped budget and
and data environments are complex resources. IFRS 17 will put additional
and fragmented. strain on the industry.

INCREASED COMPETITION GROWING DEMAND

New and innovative competitors are
entering the market putting pressure on
the margins of traditional insurers.
FROM CUSTOMERS
Encouraged by consumer friendly products
and platforms in the banking space,
customers are demanding new product
offerings and a better customer experience.

With growing demands from customers, the emergence of disruptive

technologies and significant regulatory changes like IFRS 17 and 9,
it’s little wonder CFOs of many insurance firms have been left reeling.

– Tom Crawford, Aptitude Software CEO

6 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE

Our IFRS 17 Journey

We’ve been serving insurance CFOs for
over 10 years. Varying in type, region,
business model and revenue, insurers all
agree on one thing – IFRS 17 is a significant
and challenging issue.

Our team has been working tirelessly to

understand the standard, talk to industry
experts and build out our solution and
best practices.

We’ve packaged our accounting and

regulatory change expertise together with
insights from Big 4 advisors, prospects and
customers. For most insurers, IFRS 17 will
be a long journey and we’re here to equip
you on this worthy trek.

Let’s get started…

 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE 7

IFRS 17 PROJECT MEETINGS

WITH 130 GLOBAL INSURERS

OVER 15 YEARS HELPING ORGANIZATIONS

IFRS 17 ROADSHOW EVENTS WITH REGULATORY CHANGE PROJECTS
DATA COLLECTED FROM 240
HELD ACROSS 6 COUNTRIES
INSURERS FOR OUR GLOBAL IFRS 17
READINESS ASSESSMENT (GIRA)

OUR STOPS ALONG THE WAY

8 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE
 THE IFRS 17 GUIDE | PREPARATION FOR THE JOURNEY 9

PREPARATION
FOR THE JOURNEY
10 THE IFRS 17 GUIDE | PREPARATION FOR THE JOURNEY

Building your team

IFRS 17 will require collaboration between multiple
departments with Finance, Actuarial and IT playing
significant roles. Each group will have a different set
of needs and challenges:

Actuarial: Will need to consider the granularity,

frequency and number of model runs which now MARKET PERSPECTIVES
need to be done within reporting time scales.
In a survey* of over 20 large global insurers, over 85% indicated
Finance: Will need to consider the granularity that the project team already includes representatives from
and timing of data flows, manage changing across Finance, Actuarial and IT.
methodologies, understand model movement and
Respondents also wrote in over 20 additional departments
support parallel reporting & disclosure requirements.
that are playing a role in IFRS 17 projects including Tax,
IT: Will need to address disparate systems IFRS 9 Teams, Pricing, Decision Support and Operations.
environments, incorporate IFRS 9 & solvency
requirements and navigate resource constraints.
WHO IS ON THE PROJECT

89% 93% 78%

FINANCE ACTUARIES IT
 THE IFRS 17 GUIDE | PREPARATION FOR THE JOURNEY 11

Functionally, CFOs are taking the lead on IFRS 17

but working closely with Chief Actuarial Officers
with the goal of harmonizing data, processing and
control across finance and actuarial environments.

It’s important that this is a collaborative

environment. It’s got to be an area
where everyone is working together.
Then it’s all doable.

– Linda Bembridge, IFRS 17 Expert,

Aptitude Software

IFRS 17 is a truly collaborative

project between Actuarial,
Accounting and IT - complete
with its own brand new jargon.

– Lisa Penfound, IFRS Program Director,

Co-operators Group Limited
12 THE IFRS 17 GUIDE |PREPARATION FOR THE JOURNEY

Understanding
budget and timeline
Despite an effective date of Jan 1, 2021, IFRS 17 has
already driven action of some kind among the vast NOV 2017
majority of insurers. Our Global IFRS 17 Readiness Aptitude Software’s Global IFRS
Assessment showed the bulk of respondents were already 17 Readiness Assessment shows
deep in the middle of impact analyses by the end of 2017. over 78% of insurers have at least
Our second release of the assessment due in June 2018 reached the impact analysis stage.
will show us how far the market has come.

JAN 2018

MAY 2017 IFRS 9 effective date – although

insurers can opt to defer this to
After 10 years of work, IASB
January 1, 2021 to coincide with
issues IFRS 17 to provide a more
the effective date for IFRS 17.
consistent accounting model for
reporting insurance liabilities.
 THE IFRS 17 GUIDE | PREPARATION FOR THE JOURNEY 13

We spent £500M on Solvency II. This won’t be quite

that amount, but it will be another large number.
– Tom Stoddard, CFO, Aviva

JAN 2020
Start of IFRS 17 comparative
period. Insurers must begin IFRS 17 comes on the heels of Solvency II projects
running parallel reporting that added significant weight to European insurers’
efforts in preparation for 2021. operating budgets in recent years.

In fact, the total budget for Solvency II compliance

JAN 2021
All IFRS reporting insurers
must comply with IFRS 17
or face penalties.
for all European insurers was estimated at upwards
of EUR 4 Billion* and IFRS 17 implementation
budgets expected to be similarly high.
Skills shortages, system integrations and
aggressive timetables will also affect budget.

DEC 2018
With IFRS 17 solution implementations
estimated to require anywhere from
12-30 months, the bulk of insurers will have
already kicked off projects in earnest.

*European Commission - Fact Sheet

Quote Source: Financial Times. “UK Insurers hit by biggest accounting
shake-up in decades.”
14 THE IFRS 17 GUIDE | PREPARATION FOR THE JOURNEY

Common IFRS 17 challenges

We took a quick straw poll of our IFRS 17 roadshow attendees
and asked which challenge they would rank as most significant.
The results were clear.

Roadshow Survey Results: Top IFRS 17 Challenges

80%
70% 67%
60% Don’t underestimate the
50% amount of time it takes to
40%
find the required data to
30%
18% fulfil the extensive IFRS 17
20%
11%
10% 4% primary financials and
0%
% disclosure requirements.
DISPARATE DATA BUDGET & DISCOUNTING SUPPORTING
& SYSTEMS RESOURCE CASH FLOWS & DISCLOSURE – EY, Implementing IFRS 17:
ENVIRONMENT CONSTRAINTS APPLYING RISK REQUIREMENTS Experiences from the field
 THE IFRS 17 GUIDE | PREPARATION FOR THE JOURNEY 15

Defining your IFRS 17

project goals
As seen with other regulatory changes such as revenue recognition and
leasing, organizations differ on their approach to achieve compliance.

For some, regulatory change is a chance to take a holistic look at existing

architecture, business processes and goals for the future. Others look to
comply as quickly and cheaply as possible.

Many of those attending the Aptitude Software IFRS 17 Global roadshow

are hoping to use IFRS 17 to improve their finance architecture.

The challenging question is whether the

new standard will require a big finance

26% 74%
transformation program or if incremental
accounting and actuarial change will suffice.
I believe this will depend on the maturity
of your current systems and processes,
Just want to achieve Want to use IFRS 17
and your future goals. compliance to improve or transform
architecture
– Mary Trussell,
Global Insurance Change Lead, KPMG

Quote source: KPMG Navigating the new world – preparing for insurance-accounting change
16 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE

ALONG THE WAY

 THE IFRS 17 GUIDE | ALONG THE WAY 17

Operational accounting considerations

How will IFRS 17 work in practice?

1 Access the right data, at the right level of detail

2 Define an IFRS 17 Chart of Accounts

3 Establish the right process sequence

4 Determine an approach to portfolios and cohorts

5 Ensure stronger linkages between finance & actuarial

6 Understand and explain financial calculations and volatility

18 THE IFRS 17 GUIDE | ALONG THE WAY

Access the
BEL FCF Movement Subsequent
right data, Premiums Actuarial Re-
measurement
Measurement
BEL

at the right
Run-off loss
Claims Experience Component
Discounting Adjustment

level of detail Expenses CSM at

Actuarial subsequent
Risk Adj. Model map measurement
Acquisition
Cost
CSM Unlocks,
Etc…
Much of the relevant IFRS 17 data resides unwinds,
in an insurer’s core administration accretion
systems. Multiple legacy systems CSM Initial
Risk Adj.
or system migrations can result in
Loss Comp %
incomplete data sets or gaps in policy CSM
history. IFRS 17 project teams will
Reins. CSM
also have to take into account settled Financing
items which may not go through the
actuarial environment and system
flow timing which can impact where Expect to have very different levels of granularity between systems
and at what point you take the data. because there was never any need to align granularity until now.
Working back from the disclosures is a way to identify the level of
granularity required and and figure out how to get to it.

Compiling all the policy, actuarial and financial data on

a current and historic basis will be a major challenge
 THE IFRS 17 GUIDE | ALONG THE WAY 19

Define an IFRS 17 Chart

of Accounts
IFRS 17 brings lots of new accounting concepts and the need to retain a
granular level of data. For many insurers, their current Chart of Accounts
may not support the new standard.

An IFRS 17 Chart of Account must include things like:

We don’t like to ship ‘empty boxes’ liability for remaining coverage
so our IFRS 17 solution comes with
a templated chart of accounts that liability for incurred claims
supports all IFRS 17 disclosures as CSM
well as the income statement &
balance sheet. The COA is flexible insurance revenue

and can be changed to reflect insurance service expense

certain business needs, but our
insurance finance expense
customers are finding it to be a
significant accelerator in overlaying other comprehensive income
IFRS 17 accounting onto their current
Insurers will need to work out the transition between the existing and
processes.
new COAs. This could mean directly mapping areas or closing off
–P
 hil Lewis, existing accounts and replacing them in new ones. Currently, we are
IFRS 17 Product Owner, Aptitude Software seeing the latter being the more popular accounting approach.
20 THE IFRS 17 GUIDE | ALONG THE WAY

Define an IFRS 17 Chart of Accounts

IFRS 17 accounting & disclosures demand robust process sequencing.
The ideal process sequence needs to:
Deliver IFRS 17 reporting within the working day timetable

Support accounting and actuarial process flows It’s important to sequence correctly
Account for interdependencies between groupings, model run and then run through the period so the
frequencies and delta/full model choices unlocks unwinds and accretion apply
to risk adjustments, CSM, financing and
Maintain flexibility while keeping initial measurement period consistent
directly attributable costs.
Enable the addition of new business into an open group or cohort

Opening Opening to Assumption New Economic Non Final

Balance Closing ‘Roll changes Business Variances Economic Model
Adjustments Forward’ Variances Changes

Aptitude Software has designed a best practice sequence proven to generate the correct
model results, the correct financial balances on your COA and the correct disclosures.

Portfolios are comprised
of policies that are subject
to similar risks and are
managed together.
Cohorts are groups of policies
within a portfolio, typically linked by
inception date. A cohort will continue
until the last policy has expired.
Policy is an individual insurance
contract, where significant
insurance risk is transferred
to the insurer.
THE IFRS 17 GUIDE | ALONG THE WAY 21
Determine an approach
to portfolios and cohorts
The IASB has suggested that rather than modeling at the individual policy
level, the CSM & Risk Adjustment (RA) can be modeled at the portfolio or
cohort level. Policy data, transactions, grouping data, assumption sets data
and historic & future cash flow data will need to be stored on a portfolio or
cohort and time-period basis and be fully auditable. Movements between
loss and profit making contracts will also need to be recorded.
A tale of two insurers: Two of our IFRS 17 clients are
taking different cohort approaches.
The first is looking at having annual durations for
their cohorts. This will keep the number of cohorts
down but they will have to address the complexities
of adding new business into an open cohort during
the initial measurement period.
Our second client is taking a very different
approach, choosing to use monthly cohorts, each
with an annual duration. This obviously results in
significantly more groups but will allow them to
more easily add new business that comes through
their actuarial systems later in the year.
22 THE IFRS 17 GUIDE | ALONG THE WAY

Ensure stronger linkages

between actuarial and The standard is going to create

finance systems
Typically, the Actuarial and Finance functions (and
systems) operated independently of each other. IFRS 17
will completely change this business model. Achieving
compliance demands stronger linkages between the
systems and processes each function uses.
Actuarial systems bring a trove of rich data, modeling
a world where you can no longer
be a good accountant if you don’t
understand actuarial matters and
where you can no longer be a good
actuary without understanding
financial reporting and capital
management.
– Ferdia Byrne, Global Insurance Actuarial
Lead Partner, KPMG UK

power and risk detail. Finance systems contain the

chart of accounts, disclosure reports and accounting
Quote Source: KPMG Navigating the new world –
policy rules. Together, these systems will need to share preparing for insurance-accounting change
the enormous load of IFRS 17.

Their reliance on each other, increases the importance

of moving away from manual, spreadsheet-driven
processes and toward streamlined, controlled
workflows with strong data integrity and audit trails.
Eliminating process bottlenecks is crucial.

We’ve come up with some interesting
ways to take the pressure off some
of the systems so you can get to
your numbers with enough time to
assess where you’re at. If you’ve got
a work day 5 reporting deadline,
you don’t want to be in a situation
where you’ve only got a couple of
hours contingency - you need to be
producing your numbers on work
day 2 so you have a couple days of
breathing room.
– Linda Bembridge, IFRS 17 Expert,
Aptitude Software
THE IFRS 17 GUIDE | ALONG THE WAY 23
Understand and explain
financial calculations
and volatility
The long term goals of IFRS 17 center around global reporting standardization, better
transparency and increased investor confidence. However, increased volatility of financial
results is expected in the short term. To adequately communicate with auditors, investors
and other stakeholders, IFRS 17 will require:
More advanced forecasting & simulation capabilities to provide reliable financial
projections
More frequent actuarial model runs to support the financial close process
Rapid close reporting under different frameworks (Solvency II & IFRS) and an
explanation of the varying calculation methodologies and assumptions.
Increased communications with Capital Markets & Rating Agencies to present
financial results and explain the increased complexity in the calculations
Stored and audited contract data, grouping data, assumption data and historic
& future cash flow data on a cohort an time period basis
24 THE IFRS 17 GUIDE | ALONG THE WAY

Value from compliance

Taking the right approach to compliance can support a number of valuable outcomes:

Timely access to detailed data to derive things like product, agent, sales channel
and contract profitability or cost.

Reducing manual requirements Data, systems and processes are core

ingredients for a successful IFRS 17
Better support for new product types and business models
implementation; taking a strategic look
Greater control over accounting and finance policy at the future IT Finance Architecture is an
essential step to compliance with IFRS 17
More transparency for management and audit review
and to add business benefits from it.

Aptitude Software’s IFRS 17 solution can support a minimalist, compliance-focused effort – Francesco Nagari,
through to a full finance transformation – with pricing to match what you need. Global IFRS Insurance Leader, Deloitte

While IFRS 17 poses several challenges, it also represents a once in a

generation opportunity to realize a common information landscape –
to upgrade and optimize key systems and processes and closely
align the actuarial, finance and business control functions.

– Phil Lewis, IFRS 17 Product Owner,

Aptitude Software
THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE 25
26 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE

FIVE THINGS
TO CONSIDER
 THE IFRS 17 GUIDE | 5 THINGS TO CONSIDER 27

1 Flexibility is key

2 Start from where you want to end up

3 Don’t calculate the CSM - generate it

4 Group at a high level, account at the granular

5 Don’t throw out the baby with the bathwater

28 THE IFRS 17 GUIDE | 5 THINGS TO CONSIDER

1 Flexibility is key
With most insurers set to kick off
projects well ahead of the standard
effective date, solutions must be
implemented with flexibility in mind.
Over the next 3 years, business
models will certainly change and
the IASB will build on the first
release of the standard. Insurers
are looking to implement IFRS 17
measurement models to support
business changes, new product
introductions and M&A activity.
Lessons Learned:
Three years ago we were helping some of the world’s largest
telcos navigate the beginning stages of IFRS 15 / ASC 606
compliance well ahead of the 2018 deadline.  As we look
back on those early discussions, it is evident how much telco
business models have shifted over that time – requiring
their revenue recognition solutions to change as well. Our
experience tells us that flexibility is critical in order to respond
to changes that will certainly come.
 THE IFRS 17 GUIDE | 5 THINGS TO CONSIDER 29

2 Start from where

you want to end up
Rather than starting your process by looking
at all the data and all the source systems
you have and may need, start your impact
assessments by looking at exactly what will
be required for the disclosure reports – and
then work back from there.
Lessons Learned:
Frequently during our POCs and client projects,
multiple divisions will gather in a room to discuss
data requirements to support the disclosures.
Recently during one of these workshop meetings
we were walking through the various disclosure
reports and asked if the organization utilized a
specific type of reinsurance product. We were
quickly told no by the main project team but
then a small contingent on the other side of the
room spoke up and said, that actually, they did!
We ended up using large flip charts to try to get
to a level of detail that would allow us to see
what we have and what we need in order to
complete the requirements.
30 THE IFRS 17 GUIDE | 5 THINGS TO CONSIDER

3 Don’t calculate the CSM

- generate it!
Calculating, unlocking, tracking
and releasing the CSM is one
of the most complex aspects of
IFRS 17. While there is quite a
bit out there on the calculation
of the CSM, the reality is that to
support your disclosures you need
the inputs to the CSM, not just
the result. If your accounting is
correct, the CSM should appear
as a balance.
Lessons Learned:
When the standard was initially released, there was some
confusion as to where the CSM should be calculated. Is it an
actuarial calculation or a finance calculation? Insurers are learning
that ideally it is both. The CSM at the first point of measurement
can come out of the actuarial system, but this won’t suffice
for finance teams who need to know the actual inputs to the
CSM – including account historical flows such as expenses or
commissions which may not be part of the actuarial environment.

4 Group at a high level,
account at the granular
Contracts can be grouped at a reasonably high
level in order to get the value of hedging contracts
that are going onerous versus those that are not.
While this grouping can be kept at a high level, the
underlying accounting can be done at the most
granular level. This provides better finance data
for management insights and a better audit trail
for IFRS 17 disclosure reporting.
THE IFRS 17 GUIDE | 5 THINGS TO CONSIDER 31
Lessons Learned:
One of our current clients, a global insurer,
is reaping the benefits of a sub-ledger
which gives them the ability to account at
a very granular level. After undergoing
a recent finance transformation they are
now able to generate a trial balance at
the policy level across 5 GAAPs – with
audit trails between each separate GAAP.
This not only provides insights into the
performance of various contracts, but also
allows them to easily complete the monthly
close process. They are also well positioned
to tackle IFRS 17 compliance.
32 THE IFRS 17 GUIDE | 5 THINGS TO CONSIDER

5 Don’t throw out the

baby with the bathwater
While it can be tempting to scrap your old, outdated
systems environment for something shiny and new,
you’ve got to keep your existing environment up
and running to meet tax, multi-GAAP and parallel
reporting requirements.

Lessons Learned:
In our work with large global organizations we know
that systems environments can be very complex
and often held together with spreadsheets. Adding
to the complexity is the multi-GAAP environment
in which most companies must operate. In order
to comply with IFRS 17 in the time allotted and
maintain other reporting requirements, we guide
our clients through a process that helps them
extend their architecture and provides reconciliation
between existing and new systems.
THE IFRS 17 GUIDE | 5 THINGS TO CONSIDER 33
34 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE

FINAL
THOUGHTS
 THE IFRS 17 GUIDE | FINAL THOUGHTS 35

IFRS 17, while challenging, is also an opportunity.

As insurers gain an understanding of what is required
they will hopefully realize the business gains that are
possible with the right approach to compliance.

A recent IFRS 17 roadshow attendee in Toronto

commented that his finance team is embracing
the challenge rather than fearing it.  They see it as
“massively career defining.”

We’re looking forward to helping companies through

the IFRS 17 change process and look forward to
talking to you about your IFRS 17 project.

This has got to be a collaborative environment. It’s got to be an area where

everyone is working together and everyone starts to share the load and
the learnings. It’s all doable. It’s just working through the mechanics of it.
There are answers to everything.

-Linda Bembridge, IFRS 17 Expert, Aptitude Software

36 THE IFRS 17 GUIDE | THE IFRS 17 LANDSCAPE

Join the conversation

Website
IFRS 17 resources page
www.aptitudesoftware.com/IFRS-17-
insurance-standard

Blog
Industry and customer learnings
www.blog.aptitudesoftware.com

Survey
Biannual GIRA report Q4 2017
www.aptitudesoftware.com/global-ifrs-17-readiness-assessment-report/
 THE IFRS 17 GUIDE | ADDITIONAL RESOURCES 37

Continue the conversation

@AptitudeSW

Aptitude Software

Aptitude Software
38 THE IFRS 17 GUIDE | ADDITIONAL RESOURCES

Sales contact details

NORTH AMERICA
Harry Hibbert
Financial Services & Insurance Manager, North America
harry.hibbert@aptitudesoftware.com
PH: +1 617 901 6550

EUROPE
Nick Cromie
Sales Director
nick.cromie@aptitudesoftware.com
PH: +44 7901 517659

APAC
Adam Flowers
Regional Sales Manager
adam.flowers@aptitudesoftware.com
PH: +65 82282403 (Singapore)
PH: +44 (0) 1245 790959 (alt number)
 THE IFRS 17 GUIDE | ADDITIONAL RESOURCES 39

About Aptitude About Aptitude’s

Software IFRS 17 Solution
At Aptitude Software we bring finance domain The Aptitude IFRS 17 solution enables insurance CFOs to comply
expertise, innovative software products and laser- efficiently with a platform to manage the end-to-end IFRS 17
sharp focus on the CFO’s needs to solve problems financial accounting process.
that our competitors can’t address. Our specialized
We reduce the cost and risk of IFRS 17 change programs with a
software helps companies address GAAP and IFRS
specialist product approach that leverages Aptitude Software’s
compliance issues, and empowers the finance office
proven operational accounting platform. Used in many global
with deep revenue data insights. 
insurance system environments, our platform fits between
Aptitude Software is proud of serving the CFO for existing actuarial and financial reporting environments.
20 years, delivering financial integration, accounting
engines, and other solutions that are empowering the
next generation of finance architecture.