Brian Slattery, SVP and head of Northern Europe at Clearwater Analytics, explains the implementation challenges IFRS 9 still poses insurers, and how the company can help the industry navigate the complexities of IFRS 9 reporting effectively
What is the state of play among insurers with IFRS 9 worldwide?
The industry is in a constant state of implementation and adaptation. While many insurers have implemented the standard, a number are still struggling with an efficient operating model that supports these requirements longer term.
Many still rely on people, whether it's internal or external expertise, to run largely manual processes. As a result, insurers find they still spend significant time and resources to adhere to the requirements of IFRS 9 where this time could be better spent elsewhere such as analysis and decision making.
While the standard has introduced complexities and volatility, it has also pushed insurers to reconsider their asset allocation, improve transparency, and align accounting with risk management activities. The overall effect on insurers' market performance and industry dynamics will continue to change as operating models and reporting abilities evolve.
Do implementation challenges still exist for insurers with IFRS 9?
Yes, implementation challenges still exist for insurers. Some of the key challenges include:
- Data management: Insurers must ensure they have access to high-quality data to accurately assess credit risk and comply with the new reporting requirements. This requires robust data management systems and processes to gather, validate, and aggregate relevant data from various sources. This is further heightened by several third-party data vendors releasing IFRS 9 specific datasets to the market.
- Modelling Complexities: The calculation of expected credit losses under IFRS 9 involves complex modelling techniques and assumptions. Insurers need to develop or enhance their models and methodologies to incorporate forward-looking information, macroeconomic factors, and industry-specific considerations.
- Systems and Technology Upgrades: Implementing IFRS 9 often necessitates upgrades or enhancements to insurers' accounting systems, risk management platforms, and data infrastructure. This can be a substantial undertaking, requiring significant investment in IT systems and resources.
- Stakeholder Communication and Education: IFRS 9 introduces significant changes in financial reporting, which need to be effectively communicated to stakeholders. This includes educating internal teams, management, investors, and regulators about the impact of the standard and the key changes to expect in financial statements.
Why should insurers use Clearwater Analytics for their IFRS 9 reporting?
Clearwater Analytics' comprehensive solution and expertise can help insurers navigate the complexities of IFRS 9 reporting effectively, ensuring accurate and compliant financial reporting starting with consolidated and clean data, enhancing operational efficiency, removing unnecessary manual processes, and improving stakeholder communication.
Our platform seamlessly integrates with existing systems and technology infrastructure and is underpinned by advanced data management. This comes together to ensure we can help our clients with advanced modelling capabilities that align with the requirements of IFRS 9, as well as robust, customisable reporting tools that can help insurers meet the enhanced disclosure requirements.
Will Clearwater Analytics further develop its IFRS 9 reporting solution for insurers this year?
We constantly monitor the market for regulatory changes and enhancements, so if there are changes to IFRS 9 we will adapt the product to meet the new guidance. The Clearwater system is multi-tenant, which means all of our clients benefit from the same solution so when we make changes to the system, all clients are using the most up-to-date version.
Do you expect any further revisions to IFRS 9 in the next 2-3 years and will this mean much change?
IFRS 9 is monitored and maintained by the International Accounting Standards Board (IASB). They continually seek feedback from users of IFRS to make improvements that result in financial statements that are more consistent, transparent and comparable. In that case, we can probably expect some enhancements in the coming years.
IFRS 9 benefits insurers by enhancing financial statement comparability across countries and industries, promoting transparency and accountability through reliable financial information, and facilitating global investment and trade by providing standardised accounting practices.
Additionally, it improves financial reporting quality by ensuring relevant and reliable information, and enhances credibility and trust in financial information through globally accepted accounting standards based on sound principles.
