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.
- 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.
- 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.
This article was originally published on: https://www.optimussbr.com/ifrs-17-the-race-to-the-finish-disruption-and-transformation-at-your-doorstep/