Collaboration between experts of many different disciplines will be needed to overcome the challenges presented by the incoming accounting standard IFRS17.
30 JUNE 2017 | CHRIS SEEKINGS
That is according to FIS global risk solutions leader, Martin Sarjeant, who told The Actuary that the regulation will usher in a "financial transformation", encompassing all areas of financial reporting.
It will require accountants, actuaries, and IT experts to develop ways of ensuring that all data flows between various different departments in a harmonious way, giving firms a clear understanding of their financial health.
After collaborating with software company SAP, Sarjeant said: "There were a lot of areas that we hadn't appreciated, and a lot of areas that they hadn't appreciated.
"There are terminology differences that we spent a lot of time thinking about, and adjustments to finance systems and various models which we had to consider.
"One of the biggest challenges for insurers is going to be that this is an accounting standard, its not an actuarial standard, it is CFO led, but at the heart of it will involve actuarial calculations of cashflow and contractual service margins.
"There has been a lot of learning from each other, and that will benefit customers. Products will be made stronger by having a greater appreciation of the complete package."
International Accounting Standards Board chairman Hans Hoogervorst, said yesterday that IFRS17 will bring financial stability, "shining light on risks that might otherwise go unnoticed".
Sarjeant agrees with this, citing examples of firms in countries like South Korea selling high-guarantee policies and recording the profits using flawed accounting standards.
Under IFRS17 such practices will not be permitted, and is expected to cause much disruption in regions such as India, Africa and Latin America, but China, Australia and most of Europe are thought to be in good positions.
The reporting standard will replace IFRS 4 for accounting periods from 1 January 2021, which is thought to have recently injected a sense of urgency within the insurance industry.
"At a briefing in November, I asked who is thinking about IFRS17 and there was no one, today (yesterday) I asked the same question and every hand went up, that's the difference between six months," Sarjeant said
"Everyone was waiting for the regulation, and now that has happened. Back in November I was a bit concerned that actuaries were not as involved as they should have been, but it is good to see that everyone is now getting on board."