Reading the standard, for the experienced, is a relatively straightforward exercise. However, interpreting the requirements of the standard into actual operationalized procedures is a much more complex task, especially when considering the long-term implications of an LDTI implementation, and the continued impact across multiple functions.

Accounting for LDTI is not simply a change in the DRs and CRs, but rather a new view to grouping, aggregating, and presenting insurance policies.  The implications of changes in assumptions, discount rates, and MRBs will need to be tracked at the grouping level in order to meet the increased financial statement disclosure requirements.  Many finance departments will look to capture these additional details in their GL or experience a wholesale change in their internal review and reporting structures.

Developing detailed requirements to capture what’s expected within the change to LDTI and ensuring a clear understanding of how the impact will be on an end-to-end perspective is key. Mapping those to the data requirements for the new standard is the baseline minimum change.

In this seventh and final article of our LDTI series, we explain how a sound strategy allows for more than LDTI compliance and sets the stage for success beyond mere implementation.

Why Does Compliance Require a Strategy?

Given the diverse requirements of the LDTI and the variance between understanding and implementing the new standard, insurers need to consider sound planning prior to implementation in order to achieve successful compliance.

Here are a few of the key implementation realities that insurers are faced with as they seek to comply with the new standard:

• Through our experience in many cross-functional programs similar to and including LDTI, we have seen that the theoretical interpretation can be often unachievable without significant changes to policy admin systems or other components of your end-to-end infrastructure.
• As many companies have tried to avoid letting an accounting standard define the operational processes of running their business, many have looked at the best way to reflect requirements in a more streamlined future state target operating model.

Streamline and Strategize

To ensure the appropriate alignment is in place, strong cross-functional program management needs to be in place to facilitate the conversations between finance, actuarial, and technology functions.  This will also require determination of what the build is that you are looking to achieve, whether it be Minimum Viable Product (MVP)/base compliance, optimization, or a full transformation.

Stepping into the LDTI transformation journey through a fast follower strategy allows for efficient implementation and optimization by utilizing the data and practices of other insurers within the industry. The chart below illustrates how this strategy works within the desired build for insurers. Yet, we often see clients focus on the “sweet spot” of optimization, leveraging the new standard as a catalyst for change.

 
The Right Strategy Reaps Benefits

The right strategy will allow you to achieve more than the base compliance and put the right building blocks in place for you to continue to transform your business well after compliance is achieved.

Ultimately, aligning your business objectives with the requirements of the standard can be an important task that requires specific skill sets in business and technology architecture to work through.

 
Bottom Line for Insurers

In due course, many front-runners have worked through building the right LDTI compliance strategy with various levels of help from consultants and subject matter experts to help achieve their goals. On the other hand, this experience can be integral for insurance companies who may not be as far along in their implementation, helping them avoid some of the pitfalls and surpass the theoretical to provide actual implementation insights.

Leveraging the learnings of others, having strong program governance and management in place, and investing early on will result in a much better outcome.

Insurers who plan for success and track their progress toward achieving their strategy and compliance goals will succeed, whereas those who do not invest in structuring their LDTI program, are likely the ones to experience a delayed headache that will come down the line.

By consulting with experts and with those who have supported the front runners in LDTI compliance, you can ensure that you receive the highest benefit from your investment in meeting the requirements.

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for more information on LDTI

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

This piece was developed in partnership with BDO and Valani Global.

Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey.  Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

The statutory requirements of IFRS 17 are forcing a massive disruption and ultimately a transformation within the insurance industry. No IFRS compliant insurer will be able to escape the profound changes in their operating model, accounting policies, and subsequent accounting system outputs and flows. This extends to connectivity and alignment with and actuarial systems and outputs—all underpinned by IT systems construct, data and reporting requirements.

To conclude our IFRS 17 series, we wanted to pull everything together and discuss the other large standard impact that is likely to occur.

When many insurers think of implementing IFRS 17, they may not recognize there other standards that may also need to be applied—including IFRS 9 elections for assets and liabilities, and potentially IFRS 15 for revenue outside of your insurance contracts.

Application of IFRS 9 has been a requirement for companies’ annual reporting periods beginning on or after January 1, 2018.

However, in an effort to help insurers streamline implementation, the International Accounting Standards Board (IASB) deferred the application of IFRS 9 to come into effect for applicable insurers at the same time as IFRS 17. This allows for the deferral of reporting periods beginning on or after January 1, 2023 assuming they have continued to apply IAS 39.

Many companies with an insurance arm or are not predominantly considered an insurer, will have already implemented IFRS 9, including for their insurance components. That means there’s a vast amount of knowledge surrounding IFRS 9 and its three main components:

1. Classification and measurement (C&M)
2. Impairment
3. Hedge accounting

Some companies may have already implemented IFRS 9 as part of the overlay approach. However, IFRS 17 allows you to revisit the election for the assets to be recognized at amortized cost (with appropriate amortization or Impairment), fair value through profit or loss (FVTPL), or fair value through other comprehensive income (FVOCI).  Liabilities whose effect of changes in discount rate on projected liabilities can be recognized through P&L or OCI.

For those that are going through IFRS 17 and IFRS 9 together for the first time as part of the temporary exemption and deferral approach, there are several key considerations that will be required as you navigate the dual implementation:

• In-scope assets – Depending on the categorization of the assets held by your organization, there are several impairment methodologies that can be applied, some being more complicated (modelled) than others (simplified, loss rate, or low credit risk).
• Data for those assets – Where the assets require modelling, you will require significantly larger amounts of data in order to model the impairment and expected credit loss to be held on the balance sheet (and change through the P&L). This may require that you collect and store credit data not currently used and build models that are cognizant of past, present, and future trends in order to build out 12-month and lifetime expected credit losses. This requires familiarity with the data model and elements required in a modelling approach.
• IFRS 17 considerations taken by the IASB – Permitting application of either IFRS 17 or IFRS 9 to some loans, credit cards (or similar), and other contracts allows for a simplified bifurcation and application by insurers, which allow them to take into consideration those items noted above and potentially avoid implementation costs in doing so.
• Classification and measurement matters – C&M categorization allows you to dictate the impairment methodology or application of insurance accounting, but also hold the correct assets. A change in asset mix may be considered where differences with investment strategy occur or assets are held that are not valued using FVTPL and FVOCI, resulting in the requirement to calculate impairment.

As the deadline to implement IFRS 17 nears, you need to examine and act on your compliance plans. This will include a cross-functional and holistic approach to treatment of your data & technology, along with your actuarial and finance functions. No one team can achieve compliance alone, and therefore it becomes extremely important to manage this IFRS 17 transformation effectively.

As you continue on your IFRS 17 journey or look to begin it, make sure that you are taking a holistic approach, as siloed efforts often lead to re-work and lost time. There are lessons from frontrunners that can be applied to help achieve compliance in the most efficient way possible. We, along with our partners, can provide the solutions you need to meet the required IFRS 17 deadlines.

(This is the final article in a series of seven articles.)

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America and the Caribbean to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for information on our IFRS 17 Jumpstart Acceleration Program:

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

Evan Farlinger, Principal, Financial Services Group
evan.farlinger@optimussbr.com
647.502.3739

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

The statutory requirements of IFRS 17 are forcing a massive disruption and ultimately a transformation within the insurance industry. No IFRS compliant insurer will be able to escape the profound changes in their operating model, accounting policies, and subsequent accounting system outputs and flows. This extends to connectivity and alignment with and actuarial systems and outputs—all underpinned by IT systems construct, data and reporting requirements.

Model changes sometimes sound simpler than they really are. One constant in our IFRS 17 projects is that change ends up being more complex and require more resources than anticipated.

Models need to be upgraded around three of their aspects:

1. The new accounting standard results in many of the income elements to be derived from the roll forward of the policy liability. Where systems used to deal with one set of policyholder data at a time, they will now need to handle two: one from the start of the period and one from the end of the period. Also, in order to properly reflect income in each quarter, policy movements of the period will need to be tracked as well. System providers have been working hard for a long time on their systems in order to handle this enormous increase in data to be treated. And all is not completely done yet. This means that modeling changes are being implemented at the same time as the core of the software is being modified. It leads to the need to regularly upgrade software versions—a task that will add multiple validation steps along the way as you will want to reconcile the pre- versus post-upgrade calculations.
2. New calculations need to be programmed in the actuarial software. Some may be similar or consistent with the approach and the basic structure of the system. Others will be more complex to program. Again, providers have been hard at work programming all these new calculations. However, all this new functionality needs to be tested and vetted at the same time the implementation project is in full gear. This will put significant strain on your actuarial resources.
3. Some products will see the way the valuation of their liabilities become more complex, requiring more detailed information and additional assumptions to be made before the valuation can be performed. Products with traditionally short horizons will end up being valued under the general measurement model approach will no doubt be among those causing headaches for actuaries involved in the projects.

In addition to the changes to their core, actuarial systems will need to interact with a much larger number of other systems. Where traditionally, one source file could suffice in some circumstances to perform the valuation and where the output was relatively simple, the new environment will bring a much-heightened level of challenge for the actuaries.

Sources of data are likely to be more numerous and come from a wider range of system types. That’s a direct consequence of the amount of additional data that needs to be treated. Also, a new intermediate system will be implemented: the contractual service margin (CSM) engine. This system will require a very detailed amount of information from the actuarial software in order to perform the calculation of the CSM and related loss component.

In addition, the CSM engine will perform the roll forward of the policy liability and its components. The interaction between the actuarial system, CSM engine, and data hub will increase the workload of actuaries involved in the financial statements preparation process.

Commercial software has been developed and offered to the insurance market over the last few years. As explained earlier, providers have been working hard on these solutions for a long time. In almost all cases, the development work is still ongoing, which complicates the implementation process.

However, commercial solutions are the best avenue to deal with IFRS 17. Solutions such as RiskIntegrity for IFRS 17 and AXIS, with which we are working, offer a wide array of functionality, reports, and integration that makes them relatively easy to use. No internal solution is likely to offer the same level of completeness and safety.

Finally, actuaries will need to be ready to withstand more scrutiny of their work and systems that are at the centre of the IFRS 17 financial statement work. Their systems will be more tightly linked to the other systems of the company and the actuarial process will in all likelihood be more integrated with the processes of the finance department. This will have an impact on and will require adjusting all of the governance aspects of the actuaries’ work.

Don’t let this opportunity for enterprise data advancement pass by. Our team can help you build a data hub strategy that accelerates your IFRS 17 journey and advances the data maturity needs of your organization. Contact us to get started.

(This is the sixth in a series of seven articles.)

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America and the Caribbean to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for information on our IFRS 17 Jumpstart Acceleration Program:

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

Evan Farlinger, Principal, Financial Services Group
evan.farlinger@optimussbr.com
647.502.3739

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

Across Canada, provincial governments offer a variety of application-based funding programs to fund service improvement initiatives for municipalities. In 2019, Ontario’s Ministry of Municipal Affairs and Housing launched the Audit and Accountability Fund (AAF) and the Municipal Modernization Program (MMP) to help large, small and rural municipalities improve their services by funding reviews and new projects. Little did the Ministry know that this would roll out during one of the most challenging times for municipalities in delivering services, with the pandemic impacting pretty much everything they did. In May 2020, we described how municipalities embarking on Service Delivery Reviews (SDRs) could pivot as the pandemic took hold. Many did, as we saw municipalities across the province access these funds to undertake SDRs to improve the use of technology, identify how to work and collaborate more closely with neighbouring municipalities through shared services, and find budget efficiencies throughout their budgets.

Themes from Round 1 of Service Delivery Reviews

Municipalities have largely completed the first round (“Intake 1”) of these projects, and the Municipal Affairs and Housing subsequently announced a second round of the MMP to continue to support small and rural municipalities in finding tactical, realistic ways to improve service delivery.[1] With the applications for this second round having just closed on March 15^th, we want to provide an overview of the themes we saw across SDRs, an overview of the areas of focus for the second round, and for those municipalities that are successful in their second round applications, provide some advice on how to execute with the funds made available for this investment.

The first rounds of both the AAF and MMP contained broad eligibility criteria, allowing municipalities to focus on reviews with the “purpose of finding savings and efficiencies”. Some municipalities focused on line-by-line budget reviews. Others undertook SDRs that looked at costs, processes, people, technology, and the outcomes they were achieving. Services reviewed spanned everything from Fire Services to Parks and Recreation to Fleet Management, and everything else in between. While each service in each municipality had its own unique opportunities, we saw some common themes:

• Data is hard to come by – and when you do have it, tracking and reporting are inconsistent. Despite best efforts and a desire by staff to collect and report on performance, the reality in many municipalities is that as staff wear multiple hats with competing responsibilities and limited technology infrastructure, data collection and reporting is difficult to initiate and sustain. The result is metrics that adhere to funding requirements but few key performance indicators that tell decision makers whether the service is doing what they, their citizens, and stakeholders need it to.
• Processes tend to be manual as the rule, rather than the exception. For similar reasons, staff are often stuck doing processes or collecting data manually, putting pressures on time, decision making, and their ability to improve services the way they want to.
• Technology has been implemented in many cases, but it’s been stymied by piecemeal approaches. Technology has often been implemented application by application, and in some cases department by department, without a portfolio view of technology. Incomplete use of incompatible platforms can result, setting process improvement efforts back and often acting as a barrier to further ones.

Executing on Round 2: Fit For Purpose, Whether a Marathon or Sprints

The second round of MMP funding for small and rural municipalities maintains a focus on delivering modern, efficient, and financially sustainable services; as noted, Expression of Interest applications were due March 15, 2021, with three types of projects suggested:

• a line-by-line review of the municipality’s entire budget;
• a review of service delivery and modernization opportunities; and
• a review of administrative processes to reduce costs.

While this sounds like a fairly wide scope, municipalities were encouraged to submit proposals for projects specifically focused on:

• digital modernization;
• service integration;
• streamlined development approvals; and
• shared service/alternative delivery models.

As they start executing and getting into the nuts and bolts of these areas, municipalities’ efforts here will need to be “fit for purpose”, whether that purpose is going to be a marathon or a sprint. Digital modernization and service integration are akin to starting a marathon – these are not be taken lightly, and will take a long time to complete. But the training and development to do them can be broken into discrete chunks – like a person beginning with a 5K here, then doing a 10K there, municipalities can slowly build up capabilities to tackle the larger effort. This can involve identifying stakeholders, setting up some preliminary governance or working groups, requirements gathering, and then moving into the nitty gritty. Over time, this can help municipalities address technology challenges and take on growth by allowing them to dig deeply but deliberately. These efforts – particularly when they are vendor agnostic – are rarely wasted, as they document what organizations need to understand and do at each stage, and avoid rushing to procure technology solutions too quickly This helps them decide whether the 10k run is fit for purpose – i.e., good enough – or whether they need to push further. It can also help identify key performance indicators that will allow leadership to track the efficiency and effectiveness of the service.

Streamlined development approvals and shared service/alternative delivery models, while no small undertaking themselves, can be more sprint-like. Improving discrete processes or sub-processes – items as simple as aligning on timelines, establishing communication protocols, and other aspects that will improve the predictability of the process – can be done in short bursts of activity with focused attention. Shared service and alternative delivery model reviews similarly benefit from focusing on a few select services, or often, aspects of them as municipalities identify where collaboration can take place, whether formally or informally, and then gather steam from there.

A Final Thought

COVID-19 has made citizens more engaged than ever in their communities, and acutely aware of the services that municipalities provide, and how they are provided. Whether services can be accessed easily in person or online has gone from being important to being of paramount importance for certain residents. It will be important to make sure that reviews of these issues get the focus and the process right.

Optimus SBR’s Municipal Practice

Optimus SBR is an implementation-focused firm that specializes in turning policy into action. Our Municipal Practice, part of our broader Industries and Government Practice, has conducted a range of engagements for municipalities covering frontline and back-office services, transportation and transit, social services, public works, emergency services, public health, long-term care, community and economic development, and numerous others.

If you found this helpful, give us a call, or send us a note.

Brad Ferguson, SVP, Industries and Government Practice
Brad.Ferguson@optimusssbr.com
416.649.9184

David Lynch, Principal
David.Lynch@optimussbr.com

Jesse Burns, Manager
Jesse.Burns@optimussbr.com

[1] This matches a similar “Intake 2” round through the AAF for Ontario’s large municipalities.

The statutory requirements of IFRS 17 are forcing a massive disruption and ultimately a transformation within the insurance industry. No IFRS compliant insurer will be able to escape the profound changes in their operating model, accounting policies, and subsequent accounting system outputs and flows. This extends to connectivity and alignment with and actuarial systems and outputs—all underpinned by IT systems construct, data and reporting requirements.

By now, most insurers have established an IFRS 17 implementation plan and are working on the design of their solution. This article outlines how the right data strategy for IFRS 17 can be extended across the enterprise to advance an insurer’s data maturity rapidly and cost effectively leveraging the investments in IFRS 17 as a foundation.

In working with many IT leaders on IFRS 17, we recognize that adoption of the new standard poses many issues for insurers, including:

• Significant data connectivity asks are being made to fulfill the requirements of IFRS 17.
• Quick decisions on cloud may be required as many IFRS 17 accounting engines are only available in a cloud model.
• A complex mix of current and legacy infrastructure present challenges for IT teams.
• Considerable differences between insurers in terms of where they are on the data maturity spectrum.

Despite these challenges, the data advancements required for IFRS 17 are often the right advancements to apply to the overall enterprise. This includes the following benefits.

Data as an asset

• The value of the data for most IFRS 17 implementations is high given the significant footprint of policy, claims, financial, investments, and reinsurance data residing in a variety of source systems. Establishing the right single source of the truth for the IFRS 17 dataset can naturally become the right single source of the truth for the enterprise.

Agile data integration

• IFRS 17 often requires a significant investment in data integration because of the broad impact across the technology and data landscape. Those who combine the integration needs of IFRS 17 with the integration needs of other business objectives are able to achieve economies of scale by leveraging the same integration strategy and platform.
• IFRS 17 presents a catalyst opportunity for IT to move away from a legacy point-to-point approach and adopt a modern hub approach. This enables not only the data connectivity for IFRS 17, but also sets the foundation for data maturity advancement and advanced analytics outcomes by leveraging the potential of AI.

Business intelligence and advanced analytics maturity

• Given the rich dataset required for IFRS 17 and the financial and management reporting requirements, it’s a great opportunity to leverage the business intelligence and advanced analytics used for IFRS 17 for the enterprise.

Data governance and literacy maturity

• The pragmatic data governance and data operations strategy required for IFRS 17 can be applied as the gold standard for other high-value data sets across the organization.
• The data literacy and education approach for IFRS 17 is often the same approach for advancing an organization’s data literacy overall.

The opportunity

The deadline for IFRS 17 compliance is rapidly approaching, making it crucial for insurers to examine and act on their compliance plans sooner rather than later. The question for most insurers now is: will they simply create a minimum viable product or will they seize this opportunity to truly transform their business and take a market leadership position?

Our service partner BDO has established a data platform accelerator for the insurance industry known as InsurHub to meet the data needs of IFRS 17 and establish the foundation for enterprise data advancement. It leverages the Microsoft Azure data platform and contains fundamental best practices to be the gold standard for pragmatic data governance and operations.

Why InsurHub?

InsurHub can help accelerate the path to IFRS 17 compliance and establish the foundation for enterprise data advancement. The InsurHub accelerator shortens the timeline of IFRS 17 implementations with a library of data connectors, a data lake repository aligned with the requirements of IFRS 17, key financial statements and management reports, and a collection of advanced analytics models. It contains fundamental best practices to be the gold standard for pragmatic data governance and operations.

Don’t let this opportunity for enterprise data advancement pass by. Our team can help you build a data hub strategy that accelerates your IFRS 17 journey and advances the data maturity needs of your organization. Contact us to get started.

(This is the fifth in a series of seven articles.)

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America and the Caribbean to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for information on our IFRS 17 Jumpstart Acceleration Program:

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

Evan Farlinger, Principal, Financial Services Group
evan.farlinger@optimussbr.com
647.502.3739

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

The statutory requirements of IFRS17 are forcing a massive disruption and ultimately a transformation within the insurance industry. No IFRS compliant insurer will be able to escape the profound changes in their operating model, accounting policies, and subsequent accounting system outputs and flows. This extends to connectivity and alignment with and actuarial systems and outputs, all underpinned by IT systems construct, data and reporting requirements.

Many of our clients originally underestimated the work needed to comply with the standard. For most short-term business, the premium allocation approach (PAA) can be used and it generally gives bottom-line results similar to current practice.

However, even the simplest, monoline property and casualty insurers have realized there are significant complexities in practice. These include:

• Demonstrating PAA eligibility for contracts.
• Reinsurance and contracts that are not PAA eligible.
• Discounting and risk adjusting incurred but not reported (IBNR)/claims reserves.
• Aggregation—choice of IFRS 17 portfolios (by line of business, geography, risk profile, etc.) and groups within portfolios (onerous, non-onerous, may be onerous, etc.).
• Reporting transactions and profitability by underwriting year for each portfolio and group.
• Significantly increased disclosure requirements, and changes to financial reporting.

Here are a few of the key implementation realities that insurers are faced with as they seek to understand how their product features and mix will drive compliance with the standard:

• Analysis of all insurance contracts for PAA eligibility.
• Consideration of any features including experience rating, renewal options, etc.
• Assessment of non-PAA accounting and its impact for any longer duration contracts (such as construction or warranty contracts) and many types of reinsurance.
• Assessing the impact of different aggregation choices (IFRS 17 portfolios and groups)
• Assessing the criteria for determining onerous contracts or group.
• Adjusting IT and financial reporting systems to track groups of policies by many different criteria—year of issue, aggregation levels for onerous contract testing, and matching to specific reinsurance contracts.

With the deadline to compliance fast approaching, insurers need to be rapidly examining and acting on their compliance plans. We, along with our partners, can provide the solutions you need to meet the required IFRS 17 deadlines. Contact us to learn how we can help.

(This is the fourth in a series of seven articles.)

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America and the Caribbean to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for information on our IFRS 17 Jumpstart Acceleration Program:

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

Evan Farlinger, Principal, Financial Services Group
evan.farlinger@optimussbr.com
647.502.3739

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

The statutory requirements of IFRS 17 are forcing a massive disruption and ultimately a transformation within the insurance industry. No IFRS compliant insurer will be able to escape the profound changes in their operating model, accounting policies, and subsequent accounting system outputs and flows. This extends to connectivity and alignment with and actuarial systems and outputs—all underpinned by IT systems construct, data and reporting requirements.

Compliance can’t be achieved without substantial alignment of supporting IT systems to match new accounting policies, data accessibility and data analytics/reporting requirements. For many insurers, this is the time to question the investment in upgrading legacy point-to-point systems using IFRS 17 as the catalyst to upgrade to a data hub that captures all components of the requirement—allowing for alignment of the data flows for the end-to-end process.

Here are a few of the key implementation realities that insurers are faced with as they look to decide on upgrading their point-to-point system or upgrade to a new data hub environment:

• The complexity of data integration for most IFRS 17 implementations is high given the significant footprint of policy, claims, financial, investments, and reinsurance data usually residing in a variety of source systems.
• The approach to data integration is a key consideration for the IT department because of its broader impact across the technology and data landscape. Those who combine the integration needs of IFRS 17 with the integration needs of other business objectives are able to achieve economies of scale in doing them together, leveraging the same integration strategy and platform.
• IFRS 17 presents a catalyst opportunity for IT to move away from a legacy point-to-point approach and adopt a modern hub approach. This facilitates the data connectivity for IFRS 17 and sets the foundation for data maturity advancement, enabling advance analytics outcomes that leverage the potential of artificial intelligence.
• When looking at the total cost of ownership, agility, maintainability, advancing data maturity, advancing analytics, and being cloud ready, there’s a clear advantage for a data hub strategy versus a point-to-point strategy.
• Given the rich dataset required for IFRS 17, it’s a great opportunity to take a look at your enterprise integration strategy and progressively modernize it through the IFRS 17 initiative.

While many insurers may challenge the cost/benefit of transitioning to newer data hub environments as they seek to comply with the new standard, our experience is that building on a point-to-point strategy is or more expensive that implementing a new data hub platform. Such upgrades also do not easily position the insurer to advance their overall data maturity/governance and to set the stage for capitalizing on the potential of advanced analytics.

With the compliance deadline fast approaching, insurers need to be rapidly examining and acting on their compliance plans.

We have established a data hub accelerator known as Insurhub based on the Microsoft Azure platform that accelerates the path to IFRS 17 compliance and advances an insurers data maturity for advanced analytics. The Insurhub accelerator shortens the timeline of IFRS 17 implementations with a library of data connectors, a data lake repository aligned with the requirements of IFRS 17, key financial statements and management reports, and collection of advanced analytics models.

Contact us to learn how a data hub strategy can accelerate your IFRS 17 journey and advance the data maturity needs of your organization.

(This is the third in a series of seven articles. Future articles will do a deep dive on each of the five key action areas)

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America and the Caribbean to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for information on our IFRS 17 Jumpstart Acceleration Program:

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

Evan Farlinger, Principal, Financial Services Group
evan.farlinger@optimussbr.com
647.502.3739

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

The statutory requirements of IFRS 17 are forcing a massive disruption and ultimately a transformation within the insurance industry. No IFRS-compliant insurer will be able to escape the profound changes in their operating model, accounting policies, and subsequent accounting system outputs and flows. This extends to connectivity and alignment with and actuarial systems and outputs—all underpinned by IT systems construct, data, and reporting requirements.

Reading of the standard is, for the experienced reader, a relatively straightforward exercise. However, interpreting the requirements of the standard into actual operationalized procedures is a much more complex exercise—especially for those insurers with long-tailed policies and liabilities.

Accounting for IFRS 17 is not as simple as the debits and credits accounting for IFRS 4. It’s not sufficient to simply change where you record premium income and expenses, but rather transformed in a way that places importance on when the insurance revenue and expenses are recognized.

Developing detailed new accounting policies and a wholesale change in the chart of accounts is required as well as calculations required to appropriately report within your new Income Statement going forward. Mapping those to the data requirements for the new standard is the baseline minimum change.

Here are a few of the key implementation realities that insurers are faced with as they seek to comply with the new standard:

• Through our experience in several IFRS 17 programs, we have seen that the theoretical interpretation can often not be achievable without significant changes to policy admin systems or other components of your end-to-end infrastructure.
• As many companies have tried to avoid letting an accounting standard define the operational processes of running their business, there has been some debate regarding whether certain implementation interpretations meet the ‘spirit of the standard’—a happy medium can be achieved with the right guidance.
• We have seen multiple interpretations of a few particular components of the standard:
  • Interpretation of contract boundaries to achieve a desired measurement methodology.
  • Definition of groupings, cohorts, and portfolios to meet objectives.
  • Treatment of contract modifications, conversions, and coverage additions.
  • Asset liability management and the underlying assets and yields backing the liability buckets.
  • Treatment of reinsurance and the ability to accurately determine best estimated cash flows of ceded contracts that have not yet been written.
  • Underpinning all of this are the data requirements, which may vary based on measurement methodologies and groupings noted above.

When these decisions come about, documentation is required to back the decisions made, with operational simplifications often developed in order to meet the standard in a practicable way while still proving they aren’t materially different from the standard.

Many front-runners have worked through these with various levels of help from consultants and subject matter experts. That experience can be integral for insurance companies who may not be as far along in their implementation, helping to avoid some of the pitfalls and jump beyond the theoretical to provide actual implementation insights.

With the runway to compliance shortening, insurers need to be rapidly examining and acting on their compliance plans. The only question left for most insurers is whether they use the opportunity of IFRS 17 compliance to simply create a minimum viable product or to truly transform their business into the 21st century and take a market leadership position.

We, along with our partners, can provide the solutions you need to meet the required IFRS 17 deadlines. Contact us to learn how we can help.

(This is the second in a series of seven articles. Upcoming articles will do a deep dive on each of the five key action areas.)

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America and the Caribbean to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for information on our IFRS 17 Jumpstart Acceleration Program:

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

Evan Farlinger, Principal, Financial Services Group
evan.farlinger@optimussbr.com
647.502.3739

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

The statutory requirements of IFRS 17 are forcing a massive disruption and ultimately a transformation within the insurance industry. No IFRS compliant insurer will be able to escape the profound changes in their operating model, accounting policies, and subsequent accounting system outputs and flows. This extends to connectivity and alignment with and actuarial systems and outputs—all underpinned by IT systems construct, data and reporting requirements.

While the timing of the implementation of the standard has been well known, time is now of the essence. By on or after Jan. 1, 2022, insurers will have to have planned, executed and tested their ability to comply and begin reporting in parallel to the new standard. This is no quick exercise. Without careful consideration, planning and focused execution, insurers will quickly find themselves in non-compliance.

This disruption will transform the insurance industry regardless of the type of insurance underwritten. Here’s how:

• Accounting – Accounting for IFRS 17 is not as simple as the debits and credits accounting for IFRS 4. It’s not sufficient to simply change where you record premium income and Expenses, but rather transformed in the way you do so. Developing detailed new accounting policies and a wholesale change in the chart of accounts is required, as well as calculations required to appropriately report within your new income statement going forward. Mapping those to the data requirements for the new standard is the baseline minimum change.
• Data – Data is at the heart of IFRS17. Ensuring comprehensive data quality, data controls, and data governance are all at the heart of a functioning IFRS17 compliance program. Data drives the IFRS 17 accounting engine, whether you’re required to calculate contractual service margin under the general measurement model (GMM) or the variable fee approach (VFA) or calculate the more simplified premium allocation approach (PAA). Either way, changes are needed in how you treat the data to calculate the required outputs.
• Reporting – Minimum compliance reporting requirements under IFRS 17 are well beyond what is required under IFRS 4. Generated data from your IFRS 17 accounting engine will feed the minimum reporting requirements. Limiting investment to minimum viable product may be suitable in the short term, but capitalizing on the rich data sets from IFRS 17 can transform an insurer’s business by providing deep customer and business insights to drive market penetration, retention, and profitability.
• IT Systems – Compliance cannot be achieved without substantial alignment of supporting IT systems to match new accounting policies, data accessibility, and data analytics/reporting requirements. For many insurers, this is the time to question the investment in upgrading legacy point-to-point systems using IFRS 17 as the mandate to upgrade to a data hub that captures all components of the requirement—allowing for alignment of the data flows for the end-to-end process.
• Actuarial – In many cases, actuarial models will need to be upgraded to be IFRS 17 compliant, adding new components and inputs, as well as providing updated outputs of your best estimated cash flows, containing new components such as risk adjustment. Alignment between actuals and expected at a granular level is something that IFRS 17 will rely on in order for your IFRS 17 accounting engine to work properly.

With the runway to compliance shortening, insurers need to be rapidly examining and acting on their compliance plans. The only question left for most insurers is whether they use the opportunity of IFRS 17 compliance to simply create a minimum viable product or to truly transform their business into the 21st century and take a market leadership position.

IFRS 17 is complicated and one of the largest accounting changes in years. We, along with our partners, can provide the solutions you need to meet the required IFRS 17 deadlines. Contact us to learn how we can help.

(This is the first in a series of seven articles. Upcoming articles will do a deep dive on each of the five key action areas.)

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America and the Caribbean to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for information on our IFRS 17 Jumpstart Acceleration Program:

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

Evan Farlinger, Principal, Financial Services Group
evan.farlinger@optimussbr.com
647.502.3739

Service Partners
	With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
	KR Services specializes in the practical application of international financial reporting and actuarial standards in the developing world.
	Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

Skipping the commute, exercising over breaks and making lunch in your own kitchen — working from home can sound pretty great. That’s right up until your Wi-Fi stops working, your laptop screen freezes, your dog is barking, and children are shouting in the background.

Let’s face it, many of us have encountered new frustrations and difficulties as we shift to working from home; these have been amplified in the current environment, as unfamiliar considerations like social isolation, and a need to play the role of both employee and parent, need to be addressed. Many organizations, both large and small, are currently navigating the trials and triumphs of shifting to a virtual workforce.

We’re all in this together, so we wanted to share six things we’ve learned in our first few weeks of going virtual.

1. Build a workspace that works for you. Our team has found it’s best to find a quiet space where you can close the door, especially when there are others living or working in your home. As many of us are accustomed to an open-concept workspace with plenty of background noise, turning on the radio or some music can add a touch of familiarity. We’ve also shared this New York Post Piece to guide our employees in making their set-up more ergonomic. Finally, we recommend seeking out the best spot in your space for taking video calls. Use a service like Fast.com to ensure strong connectivity, and aim for natural lighting and an appropriate background. Remember, you are quite literally inviting people into your home!
2. Agree on expectations. At Optimus SBR, we developed Virtual Workforce Guidelines to ensure we were all on the same page about working hours, availability, and the technology to be used for communication and collaboration. We’ve encouraged our managers to have these conversations with their teams as well, and are constantly looking for feedback about what is working well during this time. Agreeing on expectations is an important first step to success when it comes to remote work.
3. Set Boundaries. Establishing boundaries is important with both the people around you, and when it comes to work-life balance. Ensure those who you are living with understand that just because you are home, does not mean you are available. We’ve indicated to our employees that when there are children in the home, shifting schedules or taking the “late shift” by working after your kids are asleep might be necessary. Just as importantly, it’s essential to set boundaries with yourself, as working from home means the lines between work time and personal time can be significantly blurred. Find a way to physically and psychologically transition out of work mode at the end of the work day. That might mean moving into a different room, getting outside (while practicing physical distancing), or turning off mobile phone notifications.
4. Ramp up communications. Frequent, transparent, and informative communications are more important than ever during these times. At Optimus SBR, we are sending ‘Virtual Workforce Update’ emails from our Leadership team at least three times a week. We use these to share company news, tips for working effectively from home, and to keep employees engaged and connected. In addition, it’s critical to keep up with company-wide meetings, even if they can’t take place in person. (Schedule a practice run to ensure these run smoothly). Finally, we’ve encouraged our teams to use video calls as much as possible. In the same way you might pop over to someone’s desk, you can visit them virtually and share your screen to get quick feedback.
5. Remember virtual personas. We often take for granted how much context comes from things like expression, tone of voice, and other visual cues. It’s critical to keep this in mind when communicating virtually. Take extra care to ensure the message and tone of your response will be understood as intended before clicking “send” on your email or direct message. For example, we often read a great piece of work and respond with just the one edit, typo, or concern we have. Think about the cumulative impact of that over time with an entirely virtual team…and use video calls to communicate whenever you can!
6. Keep culture alive. As a firm that was built on culture, finding ways to keep employees engaged, involved, and connected during our transition to virtual has been a top priority. Earlier this week, we posted the infographic below to share some of our top discoveries when hosting virtual events to keep our teams engaged. Empowering employees on this front is key. We’ve seen plenty of employee-led initiatives, from a virtual ‘mid-day stretch’ to themed dress-up days. Empower your employees to keep the spirit of your culture alive. They will tell you what they need in order to stay engaged and connected.

We hope some of our learnings can help as your organization continues to find a new normal as a virtual workforce. After all, it’s essential that we keep working together, even while staying apart.