IFRS 17 solutions provider of the year: FIS

Asia Risk Technology Awards 2019

Andrew Bateman, FIS

The transition to the International Financial Reporting Standard (IFRS) 17 – the new accounting standard for insurance contracts – has led to insurers undertaking an overhaul of their IT architectures. 

Andrew Bateman, executive vice-president for capital market solutions at FIS, says this will involve actuarial and finance teams working more closely and effectively together.

He adds that IFRS 17 will close the gap between these two historically disparate functions and have a large impact across data, systems and processes.

Asian insurers have been among early adopters of the new standards, mainly due to various countries in the region re-evaluating their approach to regulation and risk management.

For example, Hong Kong’s Insurance Authority is currently examining the impact of its proposed risk-based capital regime, which was initially modelled on Europe’s Solvency II. 

According to FIS, a technology and systems provider, this has pushed Asian insurers to update and change their operations to comply with the incoming standards and new capital requirements.

This is where FIS’s actuarial modelling and reporting solution, Prophet, helps. IFRS 17, which is replacing IFRS 4, is seen as the biggest change to hit the insurance industry. Although the International Accounting Standards Board has pushed the compliance deadline by a year to January 2022, meeting this standard still remains a challenge. 

IFRS 17 requires firms to measure insurance contracts using updated estimates and assumptions that reflect the timing of cashflows and uncertainties relating to insurance contracts. This provides transparent reporting about a company’s financial position and risk. The standard also expects profits to be recognised as it delivers insurance services and insurance contract profits it expects to recognise in the future. 

FIS partnered with consultants and accounting firms who provided expertise on IFRS 17 implementation projects. As a result, soon after IFRS 17 was finalised, in May 2017, it released a solution for compliance that enabled insurers to layer the new functionality onto Prophet’s existing systems and models without costly re-engineering.

The IFRS 17 solution from FIS covers the needs of both actuaries and accountants that includes calculation, data management, process automation and accounting subledger capabilities. 

Users can perform calculations within the platform, thus allowing them to report on IFRS 17 results, as well as utilise the same engine for other purposes such as business planning, scenario-testing and pricing. 

Using a common data repository for actuarial and accounting functions mean actuaries can check the results before uploading the data to the finance teams, while accountants are able to analyse the data within a subledger environment. 

FIS’s solution includes a toolkit that provides a template end-to-end reporting process. With example models, datasets and process scripts users can start their IFRS 17 implementation.  

Prophet helps insurance companies to develop and better manage actuarial models, while satisfying reporting requirements. The platform is also deliverable via the cloud, enabling firms to minimise IT costs. 

In addition to IFRS 17, the platform is used for hedging, asset-liability modelling, capital standards, Solvency II, as well as managing market and operational risk, Bateman says.

An insurer in South-east Asia serving multiple countries is using FIS’s suite of solutions to centralise its operations across multiple business units for IFRS 17 reporting. 

Meanwhile, a senior manager at a Korean-based insurer said Prophet systematically models complex product structures in Korea and supports sophisticated cashflow calculation and insurance liability evaluation effectively. 

This allows users to quickly calculate the insurance debt cashflow for various business purposes and figure out the process of calculating the coefficients in transparency, the manager added. 

“With modellers playing a key role in reflecting all complex Korean products on Prophet, we have completed our IFRS 17 project successfully, meeting all the requirements of the standard,” the manager said.

In 2018, FIS enhanced its data and automation solutions to help insurers improve governance and control over their IFRS 17 processes. As for core calculations under the standard, the provider has added enhancements in areas such as measurement of reinsurance contracts. 

It also extended its IFRS 17 solution to provide a subledger solution for clients that need one, through the FIS Enterprise Accounting System. 

The accounting solution interfaces seamlessly with the rest of FIS’s product suite and supports posting of journal entries within a subledger and generation of financial reports. 

Looking ahead, FIS will launch new offerings in the cloud for smaller insurers to help them implement cloud-native technologies and drive down their total cost of ownership. In the next year, FIS will focus on connectivity and its application programming interfaces, along with its workflow tools so that insurers can fully automate the end-to-end process.

One of the judges commented that FIS provides a toolkit helpful for starting a compliance process. Another judge said: “It’s an all-in-one solution for accountants and actuaries. Users are able to leverage the Prophet user base and existing data, applications and workflow.”