The IFRS 17 data challenge and the technology solutions that

insurers adopted to tackle it

Foreword
Participants in the 2022 Global IFRS 17 programs were often reported As many saw, when the industry dealt
International Financial Reporting to be more complex, to take longer with the conversion to the year 2000,
Standard 17 (IFRS 17) Insurance Survey than expected, to cost more than having the right talent is essential.
confirmed that they expect the planned and to require more broadly Technically savvy professionals who
benefits of a level playing field in skilled resources. And these results did understand finance and actuarial
insurance reporting that come from not vary much for different business considerations are crucial. With a
IFRS 17 to emerge in 2023. Our first scenarios. Data capture and analysis mandated deadline and demand for
article on the survey noted that the was a recurring theme as insurers the same qualified resources from
high adoption rate of the European found that the requirement for most insurers, having the right people
Union (EU) exemption from the annual additional data granularity and has made the difference between
cohort requirement is not expected to governance was a primary simply complying versus building new
dilute that benefit. consideration as they integrated and capabilities and maximizing investment
tested packaged solutions. The need to returns.
In this second article of a four-part build foundation capabilities to tackle
series, we focus on the technology these challenges has created new Economist Impact’s survey and analysis
considerations of the survey. The effort opportunities to better report and have revealed some expected
expended on the technology needed manage financial and operational outcomes, but more importantly, new
for IFRS 17 compliance was often more information. considerations for the future.
than initially estimated, but the
expected benefits also appear to be As confidence builds with integrated Please contact me, or the Deloitte IFRS
greater. As the survey revealed, a much IFRS 17 solutions, we expect to see Insurance leader in your local market, if
more transparent and agile finance further plans that leverage these you would like to discuss the technical
capability is now possible because investments by automating workflows considerations of this research.
packaged software helps to capture and applying artificial intelligence (AI).
new information and offers analyzes in These further investments will lower Larry Danielson
ways not previously possible. costs and emphasize the need for Global IFRS Insurance Technology
business expertise as the time spent on Leader
administrative tasks continues to be Deloitte United States
reduced.

Written by
 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

The race to ensure Introduction

compliance with IFRS 17 has Ensuring compliance with IFRS 17, Our survey, which queried 360
seen insurers spend which is due to take effect in most executives in mid-2022, shows more
significantly on technology jurisdictions on January 1, 2023, has than two-fifths of respondents
cost the insurance industry billions of estimated their firm had spent over
transformation. This article
dollars in technology and operational €50 million on their total global budget
examines the depth of this improvements as it grapples with for internal resources, new systems
transformation and the implementing the biggest accounting software and hardware, and external
challenges involved and asks change in its history. fees for professional services simply to
what benefits–beyond become compliant (see Figure 1).
compliance–insurers may
stand to gain. Figure 1: What is your estimated total global budget (including internal resources,
cost to buy new systems software/hardware and external fees for professional
services) to meet the new IFRS 17 regulations? Select one.

less the €10m 0.0%

More than €10m to less than €25m 1.4%

More than €25m to less than €50m 55.0%

More than €50m to less than €75m 28.6

More than €75m to less than

€100m
12.8

More than €100m 2.2

I do not know 0

0% 20% 40% 60% 80% 100%

In 2013, just 7%percent expected to systems needed upgrading to meet

spend that much, with that proportion IFRS 17’s requirements. While most
rising sharply to 35% by 2018.1 (It is required moderate upgrades, 27% say
worth noting that, according to significant upgrades were in order (see
Nearly 95% of respondents consultants like Deloitte, the actual Figure 2)–with the latter more
costs are often higher than estimated.) common for life firms and larger firms
say their financial reporting, as measured by net written premiums
administrative and/or Also interesting is the extent to which (NWP). (This is less surprising than it
actuarial systems needed firms felt their existing systems fell might appear given the industry’s
upgrading to meet IFRS 17’s short: nearly 95% of respondents say transformation recent experience in
requirements. their financial reporting, other functions such as underwriting
administrative and/or actuarial and claims.)

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 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

Figure 2: To what extent do you feel your organization’s current technology systems
(financial reporting, administrative and/or actuarial systems) have changed to meet
the requirements of IFRS 17? Select one.

My current technology systems

required significant upgrades 27.2%

My current technology systems

required moderate upgrades 66.7%

My current technology systems

did not require upgrades 5.8%

I do not know 0.3%

0% 20% 40% 60% 80%

All of this raises an important question: Figure 3: Please indicate whether you agree with this statement: For my
Where did firms spend their IT systems- business, the benefits of adopting IFRS 17 will outweigh the expected
compliant budget? Around three-quarters costs. Select one.
of respondents say 20-40% of it went on
internal resources to design, implement, Strongly agree 13.1%
and test technology solutions, while a
similar proportion spent 20-405 buying Somewhat agree 43.6%
hardware and software solutions, and
nearly two-thirds did so on engaging Neither agree nor disagree 39.7%
external business consultants.
Somewhat disagree 3.1%
In short, insurers have spent large sums–
and have spent widely. Significantly, when
Strongly disagree 0.6%
asked whether this was worthwhile, more
than half of respondents felt the benefits of
adopting IFRS 17 will outweigh the costs, a I do not know 0.0%
first for this survey (see Figure 3). Most of
the rest were on the fence. 0% 20% 40% 60% 80%

Among those in the second group is “The trigger for the improvements
James Turner, Group Chief Financial was compliance, but now we are “The trigger for the
Officer at UK-based insurer going beyond,” Mr. Tosoni says. “This improvements was
Prudential. While Mr. Turner says he enables us to take further steps in
is “not blind to the benefits” of the the direction of being cloud-driven,
compliance, but now we are
technology upgrades required, he is digital and convergent with a higher going beyond.”
“not convinced that the benefits will degree of automation and innovation Massimo Tosoni,
outweigh the costs.” of our finance chain.” Head of Group Accounting Policy &
Reporting, Generali
In the other camp is Massimo Tosoni, Whether insurers feel positive,
Head of Group Accounting Policy & negative, or neutral about the need
Reporting at Italy’s Assicurazioni to upgrade to become IFRS 17-
Generali SpA, and a member of the compliant, what almost all have in
Financial Reporting Technical Expert common is that they have expended
Group of the European Financial immense efforts to ready
Reporting Advisory Group. Generali, themselves. And that raises two
he says, took the opportunity of crucial questions: What technology-
needing to become IFRS 17- related and operational challenges
compliant to introduce did they encounter? And what
improvements to its systems additional capabilities has this
framework, including in areas like brought?
process automation.
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 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

The data challenge

The fact that it has taken years to technology challenge in the marathon policy,” he says. “And it’s not even
become compliant is indicative of the to compliance. Notably, this was capturing data here–it’s really
challenges involved. One is that IFRS twice as common a challenge at accessing and leveraging it, and that
17 in effect requires an overhaul of smaller firms (€300-500 million NWP), has been, in some cases, very
insurers’ foundational data where nearly 52% of respondents difficult.”
management practices–from the way cited it, versus one-quarter at the
they capture data to its analysis, largest firms (NWP €5 billion+). While data capture was the most
reporting, and governance. significant challenge in preparing
For Prudential’s James Turner, data technology solutions to support
The data-related challenges do not capture was “definitely in my top compliance, it was not the only one.
end there, with insurers also required three challenges.” He cites the Other challenges included the
to collate information across business insurer’s need to access and leverage performance of such solutions, the
lines, geographies, and time. This data going back 20 years in one end-user interface (reporting),
explains why 36% of the 338 country to construct an opening calculation capabilities, and data
respondents whose technology balance sheet compliant with IFRS 17. storage/management capabilities
solutions required moderate or (see Figure 4)–with the last cited by
significant upgrades say that data “Try to imagine going back through nearly one-third of life respondents
capture at the required level of your email and getting out data you versus around one-fifth of those at
granularity across sources like created for twenty years–and now non-life insurers.
finance, actuarial and risk we’re going at it, policy by policy, and
management was their greatest working out the cash flow for each

Figure 4: Which aspects of preparing your technology solutions to support IFRS 17-compliance have given you trouble?
[Respondents selected all that apply. Respondents were those whose firms’ systems required significant or moderate
upgrades (n=338).]

Response # %
Capturing data inputs at the required level of granularity across data sources (i.e.,
123 36.4%
finance, risk management, actuarial functions)
Performance of technology solutions (i.e., speed/processing time of automation
112 33.1%
solutions)
End-user interface 102 30.2%
Data storage/management capabilities 92 27.2%
Calculation capabilities 92 27.2%
Reporting interface 81 24.0%
Data quality 66 19.5%
Cyber-security 62 18.3%
Controls 45 13.3%
Other [Please specify] 0 0.0%
I don’t know 1 0.3%

Implementing new standards, new systems

Data is central to IFRS 17-compliance. to rank their top three challenges as packaged software. This was followed
That means solving the technological their firm finalizes implementing its by budgeting sufficient resources for
challenges around gathering, technology solutions, the most cited– implementation, testing, and
processing, and storing it are also by more than 40% of the integrating operations (see Figure 5).
crucial. When we asked respondents respondents–was the quality of

4
 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

Figure 5: What were the three most significant challenges? [Respondents were those whose firm’s systems required
significant or moderate upgrades (n=338).]

Response # %
Quality of packaged software solutions (i.e., out-of-the-box functionalities were
144 42.6%
substantially inadequate for your organization’s needs for IFRS 17)
Budgeting enough resources (both internal and external) for implementing and testing
128 37.9%
IFRS-related technology solutions
Integrating operations (i.e., finance, risk management, actuarial) to optimize the use of
111 32.8%
the new technology solutions
Ability to provide sufficient staff time to deliver the implementation 89 26.3%
Ensuring adequate cyber-security (i.e., ensuring adequate data protections are in place) 82 24.3%

Selecting and implementing packaged Germany’s Allianz Group avoided the “Implementing solutions has been by
software can offer many short- and difficulties of packaged software with far the most difficult and most
long-term benefits, but there are a comprehensive project that was complex part of the program,” says
many strategic choices to be made based on its own developed solution, Prudential’s Kirsty Ward. “The biggest
when implementing IFRS 17. and which was rolled out globally. The challenge has been putting the
project, which concluded in 2021, various systems together and making
“The notion of packaged software saw the firm upgrade its actuarial sure the data flows appropriately
implies an out-of-the-box solution, calculation tools and databases that through that [architecture]. This has
but in fact we had to work closely can process data up to the general been very intensive.”
with the software firm to adapt their ledger and the group accounting
solution to P&C and Canadian systems.
regulation,” says Louis Marcotte,
“The biggest challenge has
Executive Vice President and Chief As a result, says Roman Sauer, been putting the various
Financial Officer at Intact Financial Allianz’s Head of Group Accounting systems together and making
Corporation, a Canada-headquartered and Reporting, “we were able to build sure the data flows
P&C insurer. “It’s not a question it as we would like,” adding that the appropriately through that
about the quality of the software, but firm has been able to conduct parallel
rather the fact that it had to be built runs for the past two years.
[architecture]. This has been
collaboratively between ourselves very intensive.”
and the vendor while interpreting a “And because we don't use the Kirsty Ward,
new and extremely complex standard standard software, we were Chief of IFRS 17 Delivery, Prudential
which also had regional differences.” independent of the developments on
the market and maybe the other
Another challenge was that parts of difficulties of the standard software,” Meeting a deadline requires skilled
the standard changed over time, with Mr. Sauer says. staff who are limited in supply. While
the International Accounting upskilling their existing workforce or
Standards Board announcing A typical implementation of a hiring externally are alternatives,
amendments that required firms to packaged software must meet the both require additional time. For that
understand those impacts and challenges of integrating with the reason, it is not surprising that–as
determine what new data they requisite systems that will interface the go-live date looms–demands on
needed.2 with it. On top of the integration of finance, actuarial and IT-related
different systems, the architecture for staffing are rising: the proportion of
“There were no perfect packaged IFRS 17 requires seamless interaction respondents who say their firms
solutions,” says Kirsty Ward, Chief of between departments–including employ 50+ full-time IT staff is at
IFRS 17 Delivery at Prudential. “But, in finance, IT, actuarial, and accounting– nearly 30% versus 19% in 2018, while
fairness to software companies, and across geographies. Added to those employing full-time actuarial
requirements changed even after the that, ensuring an IFRS 17 platform can staff in the 50 to 100 range climbed
standard was issued. They were be used going forward means it must to nearly one-quarter from 20% in
dealing with a moving target.” also be agile and scalable. 2018.

5
 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

Meanwhile, the proportion of part- spectrum of expertise, professional Four years on, our 2022 survey found
time workers in finance, actuarial, background and the degree of focus much the same–that successfully
and IT has also doubled–and in some on the IFRS 17 implementation versus complying with IFRS 17 requires
cases tripled–since 2018, leading to a other parallel business priorities. collaboration with others in
war for talent. Central to this is the technology design and risk
nuanced skillset needed for The emphasis on collaboration is not management. Expertise in
compliance with the new standard. a surprise. As our 2018 survey report accounting, program management
All of these data points have flagged noted, firms are “trying to drive and leadership, strategic planning,
the criticality of collaboration across tighter integrations between finance, and data management are also highly
large teams comprising a wide actuarial and other departments.” prized (see Figure 6).

Figure 6: Which skills are most-needed for your organization to be successfully IFRS 17-compliant? [Respondents selected
their top three choices. Respondents were all those questioned for the survey (n=360).]g

Response # %
Technology design and implementation 98 27.2%
Collaboration skills 85 23.6%
Risk management expertise 83 23.1%
Accounting expertise 82 22.8%
Program management and leadership 81 22.5%
Strategic planning 78 21.7%
Data management 77 21.4%
Specific packaged software expertise 72 20.0%
Communication 69 19.2%
Actuarial expertise 63 17.5%
Creativity 43 11.9%
Testing 38 10.6%
Other [Please specify] 0 0.0%
Don’t know 0 0.0%

Innovation brings new benefits

In preparing for IFRS 17, insurers have analyse vast swathes of data at a Allianz’s Roman Sauer, meanwhile,
had to overcome an array of more granular level. These much- says IFRS 17 is poised to bring a new
challenges. And while compliance was improved analytics capabilities will perspective to several aspects of the
the key catalyst for insurers’ also allow the comparison of both insurance business, with financial
technological upgrades, the journey financial and operational data. leadership being able to use the more
also means they can realize numerous granular data to analyse the business
benefits. “For us, it brought a greater better. IFRS 17 technology brings the
comparison between actual and possibility to drill down more easily
Nearly half our respondents say expected IFRS 17 results at the annual from group-level key performance
upgrades brought capabilities ranging cohort level on which IFRS 17 indicators to subsidiary level or
from a broad modernization of calculations are performed,” says portfolio level–rather than using a
actuarial models and related Prudential’s James Turner. “The bird’s eye view because of the more
technology to improved disclosure ability to access this level of data on a limited drill down capabilities pre-
processes and optimized consistent basis across the business implementation.
performance metrics. This is thanks to certainly has benefits.”
the post-implementation ability to

6
 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

“We invested in the calculation engines Although Allianz would eventually have
“We invested in the and in the database and analytic tools, accomplished that, he says, “packaging
calculation engines and in the which were more or less completely it together with IFRS 17 was a good
database and analytic tools, unharmonized and really, on an entity- opportunity.”
by-entity level, very different and
which were more or less running on local servers or local PCs, Our survey also shows more
completely unharmonized… partly,” he says of Allianz’s previous respondents now believe IFRS 17 will
That is a huge step in terms system, adding that today those have a positive impact on their
of run-times, the control functions are on a central platform on business than a negative one. Many
environment and, ultimately, the cloud. also expect easier access to capital
markets for M&A and other fundraising
stability.” “That is a huge step in terms of run- activities (nearly one-third of
Roman Sauer, times, the control environment and, respondents), improved operational
Head of Group Accounting and ultimately, stability–but to a certain efficiency of finance and actuarial
Reporting, Allianz extent also in terms of harmonization, functions (29%, with smaller firms
data availability and processing, data more likely to cite this) and financial
quality and analytical capabilities,” Mr. statements that better reflect the
Sauer says. “And that is all benefiting results of business performance (29%)
the finance function a lot, (see Figure 7).
c
independently of IFRS 17.”

Figure 7: What benefits do you foresee for your organization once it is IFRS 17-
compliant? [Respondents selected their top three choices. Respondents were
all those questioned for the survey (n=360).]

Response # %
Easier access to capital markets for mergers
117 32.5%
and acquisitions and fundraising activities
Improved operational efficiency of finance,
106 29.4%
actuarial, and other functions
Financial statements that better reflect the
104 28.9%
results of business performance
Better cross-functional collaboration within
101 28.1%
the company’s functions
Greater transparency in IFRS financial
92 25.6%
reporting than currently
Improved internal controls over financial
82 22.8%
reporting
Improved forecasting and planning 79 21.9%
Better risk management 59 16.4%
Improved technology systems 57 15.8%
Lower cost of capital 53 14.7%
Other [Please specify] 0 0.0%
Don’t know 0 0.0%
I don’t foresee any benefits 0 0.0%

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 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

Conclusion will be aligning local regulatory they plan to automate more business
frameworks with its requirements. processes, enabling greater data
With firms broadly ready for IFRS 17’s Other challenges include the analytics capabilities and calibrating
implementation, and with their unbundling of non-insurance financial planning and analysis tools
technology upgrades finalized or components packaged in an to the IFRS 17 logic in order to get the
nearing completion, the face of the insurance contract and the most out of the additional levels of
industry presented through their restatement of previous published granularity that the standard requires
financial reports is set to change. numbers to the IFRS 17 amounts to for external reporting.
Insurers will be able to convey greater be reported in the opening balance
volumes of financial information to sheet of the comparative column of In short, with more voluminous,
investors and their stakeholders in the first set of IFRS 17-compliant accessible, and granular data, and
general–and to learn more about financial statements. For calendar with automation and even artificial
their own strengths and weaknesses, year reporting entities, the opening intelligence tools available to leverage
and that of their peers because of the balance sheet of the comparative that, greater productivity
enhanced comparability. period is 1 January 2022. improvements are likely to be found.

“At the moment, it’s still a lot of What connects the challenges of the Having reported on the views of the
additional work until things are up recent past with those going forward survey participants around
and running. But in the long run, is, of course, data. As insurers test technology and data, our next article
we’re in a better environment,” says solutions with real data, the issues will set out how IFRS 17 has created a
Allianz’s Roman Sauer. surrounding them are extenuated: new financial language for insurance
data capture, management, companies, how insurers must adapt
Though many of the challenges have reporting, governance, and quality how they communicate with
been–or soon will be–overcome, will be crucial to executives. Around stakeholders, and how firms can
others remain. For nearly one-third of the world, CIOs and CFOs speak of a leverage these new metrics to explain
respondents, a top-three expected renewed push for automation: that, their business performance.
challenge of implementing IFRS 17 as core IFRS 17 requirements are met,

8
 The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it

Get in touch

Ciara Regan Noel Garvey

Partner| Audit & Assurance Partner | Audit & Assurance
Insurance Lead [email protected]
[email protected]

Daniel Gaffney Eimear McCarthy

Partner | Consulting Partner| Audit & Assurance
Finance & Performance Lead [email protected]
[email protected]

Global Contacts

Francesco Nagari Larry Danielson

Global IFRS Insurance Leader Global IFRS Insurance Technology Leader
Deloitte China Deloitte United States
[email protected] [email protected]

Anne Driver Darryl Wagner

Global IFRS 17 General Insurance Leader IFRS Insurance Americas Leader
Deloitte Australia Deloitte United States
[email protected] [email protected]

Stephen Keane Jerome Lemierre

IFRS Insurance EMEA Leader IFRS Insurance EMEA Leader
Deloitte United Kingdom Deloitte France
[email protected] [email protected]

Murray Mclaren Andrew Warren

Global IFRS Insurance Tax Leader Global IFRS 17 Tools and Accelerators Leader
Deloitte United Kingdom Deloitte South Africa
[email protected] [email protected]

Elaine Hultzer
Global IFRS 17 Auditability Leader
Deloitte Australia
[email protected]

End notes
1. See: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Financial-Services/gx-fsi-global-ifrs-ins-survey-2018.pdf
2. See: https://www.ifrs.org/projects/completed-projects/2020/amendments-to-ifrs-17/#final-stage

9
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