HOW YOU WILL CRASH

YOUR IFRS 17 PROJECT

Expert Paper
December 2021
 CONTENT

02 YOU WHO ARE THE SPONSOR OF THE PROJECT

HOW YOU WILL
You are not going to choose the solution that
CRASH YOUR really suits your objectives

IFRS 17
You will be faced with hidden costs

03 YOU WHO ARE THE PILOT OF THE PROJECT

PROJECT You’re not going to think about
involving your boss

You’ll have hard time arbitrating

04 YOU WHO ARE THE IT SPECIALIST

You will get off to a bad start

05 YOU WHO ARE AN ACCOUNTANT

You will underestimate the gap between your

previous environment and IFRS 17

You won’t allocate enough time for the project

06 YOU WHO ARE AN ACTUARY

You will neglect the footprint of your decisions

You will position the production issue too late in

your decision-makting process

This publication is produced MARIELLE DE LA SALLE You will underestimate operational constraints
under the direction of Partner, Head of Regulatory Solutions
& Implementation

addactis.com 1
 All of you are at the same table, with your Are you ready to become a pioneer?
own constraints, experiences, convictions, Do you feel that being a pioneer is
expectations, and intuition. You have to build completely different from being an expert?
a project together, to understand each other, It requires different skills and a different
to move in the same direction… Different mindset. This paper is not intended to scare
worlds to reconcile, this is a topic that is you, but, on the contrary, it aims at providing
WELCOME TO THE identified many times in the IFRS 17 literature you the good tips to be at ease with your

ADVENTURE!
and that is covered by our experts in this new role. The tips are related to some tiny
notebook. It’s hard, it requires patience, decisions that you can take thinking as an
listening, resilience and brainpower. It’s hard, expert in your former environment, and that
and yet it’s not sufficient. Why? Because may lead to unreasonable workloads. They
the revolution doesn’t concern only the come from real use cases that can benefit
Launching an IFRS 17 project is an adventure,
connections between areas, but also your any pioneer.
from all points of view: for the sponsor, own perception of your own field.
the project manager, the IT specialist, What are the pitfalls that await each of the
the accountant, or the actuary of the company. It means that you also have to take a new protagonists?
This e-book was designed for these experts. role! Today, you are an expert of your We have asked our experts to share with you
area. During all your years of practice, you some feedbacks: for the sponsor with the
have acquired a deep knowledge around choice of the solution and the hidden costs,
different issues you encountered in this past for the project manager with the involvement
framework. You experienced a lot of different of your boss and the arbitration, for the IT
situations. However, you didn’t experience specialist with architecture and evolutivity,
the IFRS 17 world yet -just because it didn’t for the accountant with gap estimation
exist!- and neither did those around you. and time management and, finally, for the
You are moving from being an expert to an actuary with footprints of your decisions and
adventurer, becoming a pioneer of the new production constraints.
standard.
We wish you a successful adventure!

2 addactis® Experts’ Paper addactis.com 3

YOU WHO ARE THE

SPONSOR
OF THE IFRS 17 PROJECT

As a sponsor, you make high-stakes trade-offs, you • Are you aligned with the provider? It is not just

ensure that the resources are committed to the project, another vendor selection. You need to be on the
same page about what the project is, what you need MARIELLE DE LA SALLE
you supervise the scoping, and you lead the steering
them for and what you’d like to achieve by working

“
Partner, Head of Regulatory Solutions
committee. You are the central person in the project together. There is the understanding of the blueprints & Implementation
responsible for supervising and supporting the project and the plans, but it is also about getting to know Middle and small companies are looking
manager. Your role is essential and strongly influences what pieces are most critical to your business. for agile mindset and efficiency thanks to
the success of the project. a team that is directly aware of their daily
business concerns. They can’t afford to support

Setting up an IFRS 17 project means, at the BEING BLINDED BY cumbersome processes that are not adapted
to their size and need to interact with actors
early stage, choosing a technical solution. We REPUTATION that are sensitive to their organization.

“
deal with external and professional solutions
below, but the warning may be translated to
internal ones.
YOU ARE NOT As a sponsor, you tend to put a lot of emphasis on
reputation, simply because you are less likely to be

There are several ways to miss this crucial GOING TO criticised for choosing a well-known name than a
challenger. CHOOSING A SOLUTION THAT
step:
CHOOSE THE Fair enough, but keep in mind that it will be so much IS INDEPENDENT FROM YOUR
more comfortable and rewarding to maximise the EXISTING EQUIPMENT
NEGLECTING THE PITCH SOLUTION chances of success than to minimise the risk of criticism.
PHASE For that, observe the context of reputation. Ask yourself
THAT REALLY how successful the publisher you suspect is. In which
Your organization already has accounting, actuarial, and
IT tools.
market did they operate? For what type of companies,
SUITS YOUR
During the selection, you will analyse commercial
Are you sure that your choice will be compatible with your
propositions and meet various people from different what business and what size? For which use case? Does
existing solutions, without compromising the comfort,

OBJECTIVES
providers. Marketing and salespeople talents play a a successful use case on a given subject and market
efficiency, and security of your teams? Won’t your
major role in influencing how the solution feels. You guarantee a relevant solution for IFRS 17, a subject with
choice lead to a duplication of work or an unanticipated
need to guide the discussions to clearly discern two unprecedented cross-functionality? Always remember
reconciliation burden?
topics: the reason you are bringing in third-party. Typically, it is
IFRS 17 is not an UFO coming from nowhere and with
more than just needing another set of hands, it’s about
no common basis with your current activity. There is
• Is the solution operational for my company? the fresh set of eyes and the expertise that they will
no obvious reason to forget your current infrastructure
During the presentation, request your internal bring to your company.
legacy -and to triple-pay your equipment (historical
teams to ask probing questions, express their
cost, plus new solution cost, plus change management
fears and understand how the solution will really
and reconciliation cost)!- Ask the provider about the
answer them.
possibility of interacting in an optimal way with your

“
current tools -unless you take advantage of it to replace

“
them, of course -.
I recommend coaching your teams before the presentation.
Ask to see a specific subject live, a specific connection, dig into the actuarial,
IT and accounting issues. Don’t just listen to a formatted sales pitch, take
STÉPHANIE DAUSQUE Local rankings -by independent bodies or Big Four- exist and make it possible
the discussion to where your issue is and ask to open the box until you find
Partner, to position publishers according to their real capacity to respond to this topic
your answer. You can send some questions in advance and save others for Head of Business Development HARRY NIKOLAOU
precisely, independently of their reputation acquired on other subjects.

“ “
a spontaneous reaction. Director, Head of Accounting IFRS 17

4 addactis® Experts’ Paper addactis.com 5

 YOU WHO ARE THE YOU WHO ARE THE

SPONSOR PILOT
OF THE IFRS 17 PROJECT OF THE IFRS 17 PROJECT

Complying with IFRS 17 is such an expensive As a project manager, you are under pressure, not only
challenge. The number of subjects inherent to control the implementation time and budget, but also
to the standard is surprising and today too to bring together a team and different points of view
little shared. Without thinking about IFRS 17 (IT, accounting, actuarial) that will have to interact and
in particular, the teams are already aware of understand each other. Moreover, IFRS 17 is complex and
some of the characteristics that bothered even expert people are still learning, which makes the
them during the previous projects (data YOU WILL BE monitoring of the project more challenging.
availability constraints, insurance products
specificities, computer slowness). FACED WITH
Today, the different RFPs that we can answer HIDDEN
to are often too general and do not include
operational issues. To anticipate this type of COSTS YOU’RE NOT GOING TO THINK ABOUT
unpleasant surprise, it is advisable to draw INVOLVING YOUR BOSS
up a map of the topics to be addressed,
to include them in the solution selection
specifications and to make the stakeholders
responsible for the durability of this map to You are starting your IFRS 17 project, or you have already
avoid future pitfalls. started several months ago. You are about to discover
an exercise in acrobatics between high-flying actuarial
work and balancing accounting. Business requirements,
Moreover, it is common to meet companies posting papers and stochastic frameworks for calculating
where the IFRS17 challenges are driven mainly the risk adjustment are confronted, discussed, and
by one department. The IFRS 17 standard is reconciled. You must juggle your IT, actuarial and
a protean subject, whose stakes depend on accounting departments. You must bring everyone to
who observes it and who talks about it. Do the table and be tactically adept at retaining the best of
not underestimate any of these three pillars: these worlds.
actuarial, accounting and IT, if you don’t want
to take a future risk of unexpected costs. It is But you are missing one important guest: your
inevitable to budget for each of these aspects, management. No, IFRS 17 is not just a matter for experts
regardless of who influences the project. in some technical field, it is also - and above all! - the
financial showcase of any insurance company, the
guarantee of a good economic health. In the future, your
management will ask you to control and manage its IFRS
17 results. However, the original choices - coverage units,
measurement models, rules for constituting GoCs - will
have been made by technicians who will have optimized
the actuarial relevance, but these choices will mark the
flow of the result in the future and will in fact have a
strong strategic impact.
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Furthermore, for control and steering purposes, your management will need specific
KPIs, those it needs to discern the situation, those it needs to validate its intuition.
These KPIs must be discussed during the scoping phase of your IFRS 17 project so that
they can be integrated and reported at the right level and frequency. Without this early
consideration of involving your boss from the very beginning, your IFRS 17 project may
remain an expert exercise where the pressure to present a nice showcase cannot be
shared in a constructive and efficient way.

YOU WHO ARE THE

PILOT
OF THE IFRS 17 PROJECT

IFRS 17 is based on specific areas of expertise.

“ MARIELLE DE LA SALLE
Like in an orchestra where musicians always Partner, Head of Regulatory Solutions
& Implementation
want to play with virtuosity by themselves,
Project managers must activate their knowledge
each expert will have a thousand and one
and play their cards right. These include:
reasons to ask for a finer degree of calculation
requesting a unique interlocutor on each area
or restitution, a more sophisticated calculation of expertise, validating the milestones of the
algorithm, a more flexible pipe with the project according to the real constraints of the
general ledger. Your role is the same as the teams (individual constraints and production
conductor’s one: to stand firm! IFRS 17 is a The subdivision of such a project is
YOU’LL HAVE
deadlines), anticipating the IT environments,

discovery for your interlocutors too, they will unavoidable and it should be carried out with generating enthusiasm and membership, or

A HARD TIME
proposing an idea box during the scoping
learn along the way, they will realize subjects a prototype phase, i.e., with a sequence of the
phase for instance.

“
that they have underestimated until now end-to-end process and then a specialization
and will make it an essential subject for the ARBITRATING phase in which each little grain of IFRS 17 sand
project. If you allow yourself a few deviations can be examined. Particularly on this subject,
from the project follow-up, because of an IFRS one must not allow oneself to ramble during
17 exception, the tunnel effect is guaranteed! the prototype phase, at the risk of still being
Indeed, IFRS 17 is a sprawling subject, and the in the process of calculating a Risk Adjustment
more the specialist masters the subject, the when the budget and the deadline have
more they will have needs that will be - rightly passed. The risk of deviation must be on all
- in the high priorities. radar’s screens on this project.
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YOU WHO ARE THE

IT SPECIALIST
OF THE IFRS 17 PROJECT

The IT department is the backbone of the project, divided COMPOSING YOUR IFRS 17 SOLUTION
between historical and new tools, between accounting USING BRICKS FROM SEVERAL PROVIDERS
and actuarial needs, between automation and lack of IS UNDERPERFORMING
stability of the global process, between performance and
flexibility requirements. The IT manager needs robust

“
It is our recommendation to rely on existing modules as
specifications for the short, medium, and long-term often as possible (see our point of view in the “Sponsor”
periods. There are several pitfalls to be aware of for a section). This is especially true for software at the heart
better journey. of the traditional activity, where people have their MATHIEU LEGOFF
experience and automated process. The issue arises
Deputy Head of Modeling
Regarding the short-term specifications, our when independent IFRS 17 modules enter the scenes & Analytics

IT experts encountered various behaviors, and without having a deep history within the company. They
We had to endure a client’s wrong choice, with
the IFRS 17 wave tasted like their Solvency 2 need dedicated mapping with each other, where IT teams
too many providers: we spent days and days
must connect and maintain several layers of useless
experiences in some respects. They followed creating mappings and pipes between different
connections.
different journeys and reformulated the same components, especially between the outputs of
the measurement models from one side and the
observations as for Solvency 2. Here are their
main traps identified. YOU WILL SELECTING A NON-EVOLUTIVE
journal postings from the other side, implying
adjustments on all the intermediary modules

DEVELOPING YOUR OWN IFRS 17

GET OFF TO A SOLUTION (BOTH FUNCTIONALLY (Data dictionary, Chart of Account and Posting
AND TECHNICALLY SPEAKING)
BAD START
rules). We knew that the first solution was able
SOLUTION IS DANGEROUS IS A SERIOUS TRAP. to cover natively the end-to-end process and
that is was not selected on the whole perimeter
Numerous internal developments failed in the for some reasons, but the waste of time and
IFRS 17 is a “young” standard. Methodologies, practices,
Solvency 2 environment. The insurance companies money resulting from this decision had been
usage will evolve. You must ensure that the solution
that experienced this bad choice were forced to change so underestimated and will have a recurrent
architecture you choose is flexible enough to be adapted
their strategy, coming back to software providers to impact unfortunately.

“
to these incoming changes.
reestablish a compliant process. This change implies
costs, teams’ demotivation, and waste of time.
IFRS 17 being more complex than Solvency 2, it is
obvious to us that the internal solutions should
be avoided at all costs. Beyond the risk of failure
mentioned above, an internal solution is very time
consuming (you must dedicate people to explore,
analyze, interpret the standard), expensive (you can’t
mutualize the cost as solutions providers do between
companies), and hard to maintain (the key man risk
is inevitable). It can be even just not possible since
this standard requires rare talents to approach
the standard with pragmatism, discernment, and
hindsight.

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YOU WHO ARE AN

ACCOUNTANT
MEMBER OF THE IFRS 17 PROJECT

Accountants are the drivers of the solution outputs. The Time is one of the top challenges concerning IFRS 17. But
result of the IFRS 17 process is in their hands and of their here is not a question of time in the sense “deadline to
responsibility, and the technical specifications must be meet” or the fact that IFRS 17 is “time-consuming”. The
“accounting-oriented”. The IFRS 17 process must reconcile point is that you can’t afford going fast and skip steps to
their requirements with the IT and actuarial constraints. ensure a timely and accurate delivery.
They are time-pressured and have to sign the company’s
results.

You have analysed in depth the IFRS 17 YOU WON’T ALLOCATE ENOUGH TIME
requirements, you have defined your chart of
FOR THE PROJECT
accounts and posting rules, and you have set
out to achieve the goal. You have identified
YOU WILL
various difficulties, including IT constraints or UNDER- The advice is that you must take your time, especially
a narrower collaboration with the actuarial
world. You are trying to figure out how the ESTIMATE on the four following issues identified by our experts,
without which running will be futile. Periods of time
actuarial teams plan to “project” premiums and THE GAP should be dedicated to these topics during the planning
you are trying to explain them the meaning and
the constraints of accrual accounting. BETWEEN of the project.

But you may encounter difficulties that are

YOUR
PREVIOUS
“
more hidden at first sight and that you must
anticipate earlier, before being under the
pressure of the implementation: ENVIRONMENT
• Align the current accrual accounting
practices and the cash accounting
AND IFRS 17 HARRY NIKOLAOU
Director, Head of Accounting IFRS 17

requirements of the new standard. You will crash your IFRS 17 project if you:
• Set up -as automatically as possible- • Do not allocate enough time to integrate the new reporting process
reconciliations and controls required and care for the extensive and complex new standard requirements for
between the new IFRS 17 ledger and the disclosures

existing ledgers. • Assume that the existing closing process milestones will be achieved
without major overhaul of the overall process
• Do not include timely the budgeting and forecasting processes
requirements in the IFRS 17 projects
• Fail to train the accounting department employees on the new standard
and engage more people on the project.

“
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YOU WHO ARE AN

ACTUARY
MEMBER OF THE IFRS 17 PROJECT

The actuary is the provider of key values of the IFRS 17

P&L, such as the Best Estimate, the Risk Adjustment, or
the Contractual Service Margin. The actuary has to choose
the best approach, justify their choices, control the used
data, and calculate the results in a short timeframe.

You are going to open the Pandora’s box

where all the talents of your team will be able
to express themselves: impact and choice
of coverage units, correlation matrices over
time and between GoCs for the aggregation YOU WILL YOU WILL POSITION THE PRODUCTION
of the risk adjustment, impact and choice of
measurement models, rules for constituting
NEGLECT THE ISSUE TOO LATE
and justifying GoCs... what excitement around FOOTPRINT IN YOUR DECISION-MAKING CHAIN
the standard, what impact of actuarial
decisions, what convoluted models to design OF YOUR
or test, what debates around concepts
to interpret, what opinions to form, what
DECISIONS
sensitivity analysis to conduct! The teams are IFRS 17 being a principle-based standard, This will require modifying, sometimes
enthusiastic but are also beginning to feel the the methodological choices are varied, significantly, the tools in place, or even
weight of the exercise. and the actuary will work hard to find requiring the acquisition of dedicated
and justify the right methodology. tools, as the existing tools cannot be
They will work, they will get tired, and they will They will work both on the theoretical sufficiently adapted.
take refuge in their comfort zone: theoretical side, aligning mathematical formulas What if the maintenance and production
actuarial science. They will make their and associated demonstrations, and facility constraint could become an input
choices according to the best mathematical on the quantitative side, testing their factor in the decision-making equation?
justification. But all in all, if the impact is assumptions on real data, to capture And what if, among the possibilities
so major, is it not a strategic issue? Are they the impacts of the different methods. tested, there was a solution based on
aware that today’s choices, from the trainee Once the verdict has been reached and the existing system, allowing better
to the senior actuary, will impact the IFRS 17 the actuary is convinced by their proven allocations of activities between the
results of their insurance organization? And results according to the two usage teams, efficiency in the analysis of results
when the outcome is not what management channels, the implementation will have and less duplication of work according
expects, reversing course will be perilous, if to take place. to the different standards? Although
not impossible. The actuary must keep in mind this approach is not destined to be a
the impact of their work today on tomorrow’s systematic success, it must nevertheless
results constraints and escalate the subject to be one of the potential candidates,
the board as often as necessary. without a doubt.

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 YOU WHO ARE AN

ACTUARY
MEMBER OF THE IFRS 17 PROJECT

WHAT AN
ADVENTURE!
YOU WILL
UNDER-
“ ESTIMATE
Implementing an IFRS 17 process is a
challenge that takes time, energy, and
money to each contributor.
JERÔME SOUVANTHONG
Head of IFRS 17 Solution
OPERATIONAL The solution providers, Big Four,

From my experience regarding previous

CONSTRAINTS or other supports that you may rely on
have a duty to understand deeply what an
implementations, a new project, a new solution
IFRS 17 implementation is and what the
or a new scope can be very exciting, but also
double-edged. On many occasions, we have
future impacts are.
had to revise the specifications proposed by They should provide you with a holistic
the client, which were indeed more refined and view of the project through a deep
much more actuarially relevant, but which came knowledge of standard requirements,
up against a lack of data, an inconsistency operational constraints, and business
between the granularity of the inventory and
monitoring anticipations.
that of the business plan, or simply a lack of
Some of these ingredients are related in
resources because the existing team could not
absorb the need for analysis induced by the
this paper, up to you to lead your IFRS 17
request. We are not better at actuarial work, journey to success!
but we have encountered so many different
situations and pitfalls experienced by our clients
that our alert level is relatively high.

16 addactis® Experts’ Paper “ addactis.com 17

Working alongside insurance players since almost 30
years and providing dedicated actuarial & software
solutions to tackle main insurance challenges
regarding data management, capital modeling,
reserves calculations, regulatory compliance,
risk management and profitability, addactis® has
developed a deep comprehension and strong
methodologies & technologies.
Our IFRS 17 journey began nearly 20 years ago when
we launched our first reserving software – IBNRS® – MORE ABOUT
in 2003.
Over the years, we have been able to acquire a strong
IFRS 17?
and recognized expertise in reserving calculation, and
IFRS17 has been the logical extension of our offer. visit w w w . a d d a c t i s . c o m /
In 2017, we have created our internal Taskforce news-insights/premium-
composed by R&D experts, actuaries and contents-ebooks/
accountants, software designers… We have now
succeeded in answering the main questions of
insurers regarding IFRS 17: how to understand the
regulation and above all, how to transform all the
principles into a standard and flexible end to end
solution covering all the topics: Actuarial (Cash Flow/
RA /CSM engine), Finance (Subledger), and IT (ETL and
Dataflow of the process).

THE RISKTECH FOR INSURANCE