Updating the global standards for the insurance contracts IFRS 17 has been the most transformative change the insurance industry has encountered in decades. It adds and shifts requirements for how insurers recognize revenue, measure liabilities, and present financial outcomes which proves further complicated in its essence. This change comes with both difficulties and the prospect for improvement for the firm which employs Infor SunSystems. These challenges present newly set requirements which would enable those versed with Infor SunSystems to masterfully transition to a newly set rigid regulation.
Infor SunSystems has been of great use to clients in a plethora of industries for its versatile and advanced accounting functionality. It is, however, IFRS 17 that now makes insurance accounting a simple, sophisticated complex quantity, and which, in turn, demands enhanced and granular disclosures. The imaginative blend of new accounting requirements and legacy financial systems makes and provides a window for learning and optimization on technological and strategic financial balances.
Challenges of the IFRS 17
IFRS 17 Changes the way insurance companies recognize revenue and profits by implementing concepts like the CSM (Contractual Service Margin), insurance contract groups, and current-measurement frameworks based on new and revised assumptions. All assumptions use cash flow projection models and reflect cash flow regarding the timing and any ambiguity associated with insurance contracts.
IFRS 17 is complex, requiring companies to calculate the present value of future cash flows and the components of the associated reserves, reserve for non-financial risks, and, separately, the CSM, which is considered to be the unearned profit. These calculations must be made at a level of detail which a lot of companies, in their past, have not captured in their financial reporting systems. The IFRS 17 standard requires the granularity and unified reporting framework analytic modules focusing on new contract underwriter disclosures.
The case of Infor SunSystems, however, is more complicated. SunSystems has limited IFRS 17 capabilities, and ultra-advanced modules regarding IFRS capabilities in the rest of the market, and more integrated and cohesive solutions are not useful for deeper insurance company accounting functions. The strategy in this situation is designing the answer around the limitations of insurance accounting in SunSystems. Infor SunSystems’ Key Features Relating to IFRS 17 Financial System Implementation.
The flexibility of Infor SunSystems brings several important advantages to meeting the challenges posed by the IFRS 17. For global insurers operating in several countries, the values of the system's strong multi-currency and multi-company capabilities are of utmost importance. Customization to flexibility architecture to meet business demands is critical in this case.
SunSystems robust general ledger functionality is perhaps the one of the systems greatest strength, and is the foundation required for the detailed tracking required by IFRS 17. It is the system’s ability to handle complex organizational structures and multi-level analytical coding that makes it particularly suited for the granular detail for insurance contract accounting. It is the powerful inbuilt reporting of the systems that creates a strong basis for the new standards required enhanced disclosure that is under pillar 3.
The flexibility to grow and add additional data, as well as Infor SunSystems’ reputation in the market, brings a key advantage in these domains: stability and reliability when adopting globally complex standards like IFRS 17. The trust that companies know SunSystems creates much less risk during the implementation phases largely due to the lower learning curve. This compared to adopting totally new systems means much lower overall implementation risk.
Bridging the Gap: Enhancements to SunSystems to Meet IFRS 17 Requirements
Though Infor SunSystems offers a fundamental financial framework, most organizations will need to enhance their implementation to meet IFRS 17 requirements fully. This, in most cases, will entail multiple layers of coordinated planning to build further on the capabilities of SunSystems while overcoming the complexities involved in accounting for insurance contracts.
Many organizations employ specialized sub-ledger solutions that do the intricate IFRS 17 calculations, which are then uploaded to SunSystems for general ledger posting. This allows organizations to retain their investment in SunSystems while gaining additional specialized functionalities for insurance accounting. The sub-ledger system takes care of all the calculations, including the CSM amortization, risk adjustments, and present values, while SunSystems acts as the financial transactions record.
Another popular approach is building proprietary extensions within the SunSystems framework. With SunSystems’ open architecture, organizations can develop additional modules that address specific IFRS 17 elements. Increased insurance contract data capture, calculation engines for CSM measurement, and reporting templates for pertinent disclosures may all be parts of the proposed additional modules.
Data integration is another area that enhancements are warranted. IFRS 17 deals with information from various sources like actuarial systems, policy administration systems, claims systems, and investment repositories. Often data integration is very advanced and is used to transform information for accounting purposes and upload the data to SunSystems for financial accounting and reporting.
Implementation Considerations for Users of SunSystems
Infor SunSystems users starting their IFRS 17 journey have unique challenges that can make or break their implementation success. Availability of the data and the quality of the data seems to be the most crucial. IFRS 17 stipulates that very specific information concerning insurance contracts is needed which a lot of corporations didn't have in their historical financial systems. Companies need to figure out what data is stored in SunSystems, what data is needed, and what data is stored in other systems and who their systems need to connect to.
Process reframing is yet another important issue. Apart from changing the accounting entries and the ISRS 17 changes business processes that revolve around financial reporting, data collection, and performance measurement, accounting processes also need changing. Companies have to change their systems for information to be collected from different contracts and have to do with a few informative and lots of analytic reports which involves change of workflows.
The organization needs to avoid duplication of efforts. Business continuity needs to be in place as systems are tested. Accounting practices using IFRS 17 can be validated towards the end of the project while still working on the existing system. It is possible and necessary to avoid the new and old duplication efforts. Steady periods are planned to reduce the duplication of efforts and to attain the successful integration systems goals.
The additional value of meeting the necessary compliance of IFRS 17 on Infor SunSystems is the business strategy value it can bring to the insurance sector especially with the improvement of the data quality. There are bound to be operational improvements available. The IFRS 17 reporting, likely to provide granular data, captures much deeper insights into product profitability and risk exposure. This knowledge, when captured and analyzed, can be leveraged for product pricing, product development, and effective capital allocation. Additional information mandated by the standard fosters better understanding of the business resulting in improvement in market valuation and lower cost of capital for executives and investors.
Foremost, data governance and financial control discipline enhancements are also driven by the implementation of IFRS 17. Initiatives to rectify long-standing data quality issues will be propelled by the need for precise and accurate information. Furthermore, enhanced financial compliance capabilities are achieved with the strengthened overall financial controls and audit trail requisites.
The centralized implementation of Sun Systems for multinational insurers enables the consistent application for IFRS 17 across all entities which simplifies and improves reporting and analysis within groups. This enhances the ability to assess performance across different regions and business units, thereby facilitating more effective strategic decisions at the corporate level.
Proofing Future Upon Implementation
When firms complete their first IFRS 17 implementations on Infor SunSystems, their focus shifts to maintaining and adding to those solutions over time and boosting functionality as the standard itself continues to evolve with the issue of different interpretations and legislative direction by various bodies. Change will also occur in the business environment with the emergence of new products, distribution channels, and risk factors.
For sustained success, it will be vital to construct an implementation that is flexible and adjustable. This means planning for alterations to the technology, business models and accounting warranting change. Iterative enhancement would mean creating modular architectures as opposed to full redesigns of implementations when requirements change.
IFRS 17 is a major shift from the previous accounting practices and the goal of architecture is to allow an organization under low personnel risk to maintain and sustain systems in the organization. To accomplish that, the organization needs ongoing capturing of training schedules and refined knowledge management to help the organization in future sustaining their implementation.
Periodic review and refinement make certain that the system deployment ongoing still aims to achieve the organizational objectives in the most economical way. With time, many organizations start to recognize the need to process and enhance data quality or reporting process capabilities. Incorporating these process enhancement cycles into the ongoing maintenance of the SunSystems environment helps deepen the value derived from the implementation.
Conclusion: Adapting to the Changes Constructively
Having the SunSystems system in place will aid in the achievement of IFRS 17 with careful planning and deployment. Some of these organizations will gain a competitive advantage by meeting the SunSystems capabilities and the shortcomings in the insurance accounting module of the system. The gain will be relative to the objectives of the region since the designed systems must maximize value beyond regulatory compliance.
To achieve success with IFRS 17 deployment, the systems must be designed with a systems approach. There are many interrelated components which include data capture and architecture, as well as business level architecture. There is a unique opportunity to enhance quality of data, control systems, and actionable intelligence from the organization. This is a transformative approach and leverages the implementation of IFRS 17 as an opportunity to perform a positive business change.
In the case of Infor SunSystems users, the pathway to IFRS 17 compliance could mean enhancements, integrations, and process changes. This, however, does not mean that the organizational trust in the financial management platform will be lost. SunSystems could act as the backbone of an elaborate financial reporting framework that is constructive, modern, and compliant. This will address the complexities of contemporary insurance accounting.
Scopes both within and beyond the insurance sector will be evolving as per IFRS 17. For other enterprises that were able to integrate the standard into their SunSystems environments, flexibility in adapting to these industry evolutions will be an added advantage. Such enterprises will be able to capitalize on their data to achieve competitive superiority while offering clarity to their stakeholders. All the calculations that go into getting IFRS 17 on SunSystems will pay off in beneficial advanced analytics and forecasting in the future.
Sign in to leave a comment.