Data, systems integration, processes, reporting…: The Strategic Role of Finance in IFRS 17

In the rapidly evolving insurance industry, finance and accounting teams are essential drivers of operational improvement and regulatory compliance. The introduction of new reporting standards like IFRS 17 has prompted a shift toward data centralization and systems integration, moving away from fragmented processes. This transformation empowers these teams to not only enhance financial reporting accuracy and risk assessments but also improve decision-making and forecasting. Despite these advancements, challenges remain in optimizing processes, aligning with changing regulations, and fostering synergy across reporting frameworks.

In recent years, actuarial and finance teams have collaborated to harmonize data formats, definitions, and reporting protocols, ensuring consistent data sharing and understanding across departments. Outdated spreadsheets and fragmented databases have given way to modern data analytics technologies, which create unified sources of high-quality data.

These initiatives are further supported by advancements in data governance and quality management. Insurers have implemented governance frameworks that define data ownership, establish access controls, and outline validation procedures, ensuring data remains accurate, secure, and up to date throughout its lifecycle.

By centralizing information and creating shared databases, finance and accounting departments have reaped significant benefits. Simplified data storage and access allow teams to work with the most current and consistent data, resulting in more accurate financial forecasts, risk assessments, and reports. Moreover, centralized data eliminates redundancies and errors caused by siloed systems, improving overall decision-making processes. This robust data infrastructure allows finance teams to focus less on low-value tasks like data reconciliation and more on becoming strategic business partners.

With data centralization underway, CFOs in the insurance industry are now focusing on further integrating actuarial, financial, and reporting systems to enhance operational efficiency. The goal is to enable seamless data flow across critical functions, streamlining and automating processes. For example, integrating actuarial models directly into financial systems allows insurers to automatically transfer projections into financial reports, reducing manual reconciliations and improving accuracy. As a result, data quality controls and data preparation for the different reporting frameworks shift to raw data, minimizing the need for managing intermediate steps.

This integration also supports real-time reporting, allowing financial and risk data to be accessed instantly for quicker decision-making and more agile responses to market dynamics. Furthermore, as seen with IFRS 17 implementation, system integration increases transparency and consistency in reporting. Unified systems can generate comprehensive, regulation-compliant reports without the need for manual compilation from multiple sources.

Integration also enhances the ability to use advanced analytics by merging data from actuarial, financial, and operational departments. This allows insurers to leverage predictive insights and scenario analyses, strengthening risk management and strategic planning. The ultimate objective is to reduce inefficiencies, eliminate redundancies, and foster a more agile, data-driven approach to financial and actuarial management.

Regulatory changes like IFRS 17, LDTI (Long-Duration Targeted Improvements), and revised solvency requirements have accelerated the transition to integrated systems and enhanced reporting frameworks. IFRS 17, for instance, introduces new complexities in accounting for insurance contracts, requiring greater data sharing between actuarial, financial, and risk teams. Similarly, LDTI in the U.S. emphasizes transparency and uniformity in financial disclosures, prompting companies to reassess their systems and processes.

However, the journey toward full integration is ongoing. Consolidating systems onto a single platform is just the first step. Insurers must now focus on refining processes to ensure smooth communication between different reporting frameworks, including local regulations and global standards like IFRS 17. Achieving full integration requires not only technological upgrades but also organizational changes that promote cross-team collaboration, such as restructuring workflows and improving communication between departments.

For example, instead of maintaining parallel processes for solvency and financial reporting, companies can leverage common elements between the two, using technologies like RPA (Robotic Process Automation) and AI to address calculation differences and provide clearer explanations of results. Now is also the time for insurers to include previously excluded product lines and systems from the initial scope of Solvency and IFRS 17 programs. While these exceptions may be small, they often require significant manual effort in an otherwise automated environment.

In summary, while progress has been made in system integration and compliance with new standards like IFRS 17, finance teams still face challenges in optimizing processes, adapting to new cultural norms, and aligning local and global regulatory requirements. Overcoming these hurdles requires a comprehensive approach that integrates technological upgrades, process re-engineering, and a renewed focus on collaboration and communication across teams throughout the organization.