South African life insurers’ views on IFRS 17 and other industry topics

IFRS 17 is settling into BAU

Methodology choices have more or less been settled, with decisions around risk adjustment, discount rates, coverage units, etc. only being refined rather than overhauled. Recent audits have generally been less onerous – except where new auditors have been onboarded, which has caused some audits to be even more difficult than last year. Boards are cementing their understanding of IFRS 17 and are able to provide feedback on the results themselves rather than just on IFRS 17 as a project. IFRS 17 is also, in most, if not all, cases, becoming the basis for financial reporting, KPIs, management information and Board decisions.

IAS 8 requirements are a major concern

The vast majority of respondents are concerned about the implications of IAS 8, which deals with changes in accounting estimates and errors. Some participants had to restate results in recent reporting periods and those who didn’t spent significant time with their auditors assessing whether findings were errors or re-estimates and, where they were errors, their materiality. This is foreseen to be a major area of risk and concern for years to come.

IFRS 17 has provided an opportunity to modernise

Insurers have been forced to improve models, systems and processes, given the complexity of calculation and reporting required by IFRS 17 – in addition to maintaining several other reporting bases in some cases. While many respondents have made significant progress in optimising their processes, some have still had to take measures such as employing additional resources or working longer hours to deliver on time.

Those who built their own IFRS 17 engines are still the happiest

Respondents who built their own CSM engines in Excel or other systems are still happiest with the results. Those who purchased off-the-shelf solutions have had a more mixed experience, with some being more satisfied with their chosen vendors than others. None of the respondents, however, are looking to change providers in the near future.

Future focus: automation

While some respondents still cite IFRS 17 as a major focus area for the foreseeable future, most insurers are (also) focusing on automation of repetitive tasks. Furthermore, they are starting to explore the applications of AI in their reporting processes and more broadly. The focus on automation may be driven by the increasing time and resource pressures generated by the IFRS 17 reporting cycle. While many insurers still predict changes to their systems landscapes over the next five years, the conversation seems to have evolved to optimising current systems rather than migrating to new ones.