The International Financial Reporting Standard for insurance contracts (IFRS 17) was published in May 2017. In parallel with this long-awaited development, IFRS 7 and 9 (Financial Instruments) have defined treatment of insurers' assets and investment contracts, while IFRS 13 has defined the concept of fair value. Insurers have been using Prophet to report on insurance business under IFRS 4 since 2007, and until now the calculations have been effectively consistent with local GAAP.
Prophet's Life and Health liability libraries are designed to calculate the future cashflows, time value of money and risk adjustment for long term business modelling under the Building Block Approach, BBA. The IFRS 17 Group Calculations library uses results from liability models to perform aggregate calculations such as the Contractual Service Margin at the required unit of measurement and generates the statement of comprehensive income. Both the General Model and the Variable Fee approach are supported and with the use of the Nested Structures feature of Prophet these values can also be projected.
Similarly Prophet’s GI/P&C libraries are designed to calculate the Premium Allocation Approach, PAA, typical for short term business.
The IFRS regulations also assume a high level of control and auditability of the data, and FIS have solutions for each stage of the data management process – Assumptions Manager for the inputs, Prophet Enterprise for the calculations and results, Prophet Control Centre for overall work flow management, and the Insurance Data Repository for linking the actuarial data to the chart of accounts within the accounting systems.
FIS encourages our customers to engage with us on this - both about the capability to meet the calculation requirements and about introducing the controls and software needed to ensure that analysts are convinced by the commentary on financial results and risk management. For more details please see our IFRS brochure.