The implementation of IFRS 17 has occupied many insurance companies’ Finance change agenda over the past years. As the implementation programs have come to an end, it is now up to the regular ‘business as usual’ line function to run the IFRS 17 closing process. The Finance team needs to be able to explain the figures and the movements, as this is critical information for steering the insurance company and informing the capital markets. Management wants these figures available as soon as possible to facilitate decision-making. Moreover, since implementation budgets are closed, the responsibility for any IFRS 17 backlog items and issues (often arising from quick work-arounds during implementation) has been transferred to the line organization.
Most insurers have already encountered challenges along the way, reflected in operational or financial risks in reporting with respect to the opening balance sheet, determining the comparable figures for FY 2022, or preparing interim 2023 statements. One of the key challenges is the accounting for unexplained or inaccurate items in the Analysis of Change (AoC) of the insurance liabilities. At the same time, insurers struggle with the role of the second line. Whereas the Actuarial Function is a prescribed role in the Solvency II reporting process, this function often remains out of scope in IFRS17 as it contains increasing demands on the quality and controls of the first line. For the first line, since IFRS 17 is based on market valuation, most European insurers have rather sought alignment with their Solvency II reporting chain, given the similarities between the two requirements in underlying principles. Theoretically, this should induce synergy and efficiency. In practice, this implies that the same teams are now responsible for two extensive reporting frameworks (as opposed to Solvency II and IFRS 4).