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CCH Tagetik
Solution Guide
Are you ready for IFRS 17?
As IFRS 17 races down the compliance pipeline, it’s set to disrupt how insurers manage operational costs, KPIs, and forecasting. The result? A significant change to insurance accounting requirements that, without the right strategy, will lead to a time-consuming and expensive overhaul of financial management processes, applications and operating models.
The International Accounting Standard Board (IASB) issued the new Insurance Accounting Standard,IFRS 17 Insurance Contracts on May 18, 2017 to be applied for reporting periods starting on or afterJanuary 1, 2022. IFRS 17 includes three measurement approaches, which have markedly differentrequirements when compared with existing standards:
General Accounting Model (GAM) (or Building Block Approach (BBA))
Premium Allocation Approach (PAA)
Variable Fee Approach (VFA)
In response to these new and expanding regulatory standards, CCH Tagetik has created acomprehensive solution for addressing all of the challenges associated with IFRS 17, includingcalculations that address all three measurement approaches issued by the IASB.
Easy To Implement & Use
Starter kit with low TCO
Powerful IFRS 17 Engine
Integrates With Existing Architecture
Creates Single Version Of Truth
Disclosure & Reporting Capabilities
You Need A Comprehensive IFRS 17 Solution
IFRS 17 CHALLENGE
Many different source systems
OUR SOLUTION
Powerful ETL provides seamless integration with any source
Transition Management Capabilities to upload transition historical data
Large amounts of data Platform created for processing high volumes of data
Articulated end-to-end process A single workflow to drive the entire process
Calculates GAM, PAA, and VFA Highly Configurable
Unit of account (UoA) definition Data normalization to identify the proper level of data granularity
1
2
3
Impact on FS and Disclosures Ad hoc reports and documentation can be created
Auditability – data lifecycle insight Full auditability, integration with BI tools
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In the coming years, insurers will need to interpret and apply the IFRS 17 requirements to their
insurance contracts — a process involving significant time and effort. The major change program
required will extend beyond finance and actuarial teams and its impacts will need to be communicated
to a broad range of internal and external stakeholders. Source: EY Publication, “IFRS 17: What to Do Now”
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IFRS 17 EVALUATION
METHOD
GENERAL
ACCOUNTING
MODEL
For most long-term
contracts
MANDATE
Standard approach
applicable to insurance
contracts and
reinsurance assets
held by the insurer
KEY POINTS
Introduces the concepts of:
Discounted Cash Flows
(CFs), Risk Adjustment (RA),
Contractual Service Margin
(CSM) & onerous contracts
Automatic discounting of
CFs, calculation of RA and
CSM. Clear identification of
onerous contracts
CCH TAGETIK APPROACH
PREMIUM
ALLOCATION
APPROACH
For most short-term
contracts
Simplified approach for
short duration
contracts or re-claims
obligation at initial
recognition
Premium is released
over the coverage
period
Evaluation method based
on initial recognition and
premium release over
subsequent measurement
VARIABLE FEE
APPROACH
For contracts with
direct participation
features
Applicable to
investment contracts
with direct participating
features
The entity shares of the
underlining items
considering the future
service (CSM)
Automatic calculation of the
effective yield rate,
projected crediting
rate,book yield approach
“
Our approach:
CCH Tagetik Unified Performance Management
Solvency II
(Pillar I, II, III)
Revenue
Accounting
(IFRS 15 &
ASC 606)
Financial
Instruments
(IFRS 9)
A single data repository; a single solution. CCH Tagetik Financial Performance Platform gives finance
complete visibility and control of corporate data. From plans to forecasts to disclosure (and all the reports
and analysis along the way), your entire organization can work within one unified application.
With the new IFRS guidelines, it becomes crucial for companies to
manage the governance through an application solution.
When a single solution governs the process, users get:
A solution that covers the process from end-to-end
Flexible configuration ready to adopt to changes
Monitoring of the whole process
Operational workflow management
A solution that ensures the auditability of the information
Impact analysis with drill down on the lowest level
Opportunity to use an integrated platform for financial reporting
& disclosure
“
Regulatory Solutions
Insurance
Contracts
(IFRS 17)
Lease
Accounting
(IFRS 16 &
ASC 842)
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How Your Team Benefits From CCH Tagetik IFRS 17 Solution
The impact of IFRS 17 will be extensive across your entire organization, affecting the accounting policies, systems, and processes your team has in place. For this reason we designed an IFRS 17 solution that would benefit everyone. Our solution has a proven track record of increasing efficiency,
decreasing cost, and reducing risk across all departments.
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Impact: Communicate expected impacts to the financial statements and profit profiles key stakeholders Update current management reporting, KPI’s and incentive frameworks for analyzing margins and
volatility Update Actuarial and Finance systems and implement new IFRS 17 & 9 systems
How CCH Tagetik can help: Pre-configured solutions for IFRS 17 & 9 can be implement quickly to understand expected impacts
early CFO will be able to quickly see if any changes need to be made to current reporting, KPIs and
incentive frameworks in order to successfully comply with IFRS 17
Impact: Allocate time and resources to projects to design, build and test new data, modelling and systems
capability Update accounting policies and procedures Update accounting rules and ledgers to capture CSM on B/S and CSM amortization on P&L Update consolidation, disclosure and performance management (budgeting, planning, forecasting)
solution
How CCH Tagetik can help: Pre-configured solutions for IFRS 17 & 9 can be implement quickly Experience integrating with Finance systems Single platform and source of truth for IFRS 9, IFRS 17 and CPM IFRS 17 starter kit for data model, calculations, reports and postings
Impact: Allocate time and resources to projects to design, build and test new data, modelling and systems
capability Work with the finance team to estimate impacts on transition and design optimal approaches Update Actuarial/risk/capital models Update modelled results output to reflect IFRS 17 grouping and CSM
How CCH Tagetik can help: Experience creating interfaces with Actuarial systems IFRS 17 starter kit data model with flexibility to load or calculate the future cash flows Includes a powerful calculation engine for amortizing and adjusting the CSM
Impact: Operational data sources Update Actuarial and Finance systems Implement new IFRS 17 & 9 systems
How CCH Tagetik can help: Seamless integration with existing architecture Vendor agnostic integration with Actuarial and Finance systems Comprehensive solutions for IFRS 9, Lease Accounting (IFRS 16 / ASC 842), Solvency II and CPM Cloud or On-premise options with the same full functionality for both
CFO & Stakeholders
Finance & Operations
Actuarial
IT
Source: EY Publication, “Impacts of IFRS 17 insurance contracts accounting standard” & “IFRS 17 what to do now Implications for European Insurers”
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The CCH Tagetik IFRS 17 Solution
Sample Architectural View
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1. Source systems feed insurance accounting system, which collects and normalizes accounting data belonging
to all the subsystems involved (policies, claims, etc.).
2. Source systems feed a data warehouse, which collects and normalizes master data and attributes belonging
to all the subsystems.
3. Insurance accounting system feeds General Ledger with accounting relevant data.
4. Insurance accounting system feeds possible data warehouse with accounting relevant data.
5. Data warehouse feeds actuarial & risk platform.
6. Monthly Accounting Data enriched with master data and attributes feeds CCH Tagetik – IFRS Solution from
the Data warehouse. In order to simplify representation, we are including the (market) rates to be used for
discounting future cash flows in the data flow. Accounting data must be natively reconciled with data flow #3.
7. General Ledger monthly feeds CCH® Tagetik – IFRS Solution for detailed items that must be allocated at the
Unit of Account level.
8. Actuarial system feeds CCH® Tagetik – IFRS Solution monthly with future cash flows (or with parameters
necessary to create them in CCH® Tagetik) and risk information needed to perform risk adjustment
calculations.
9. CCH® Tagetik – IFRS Solution monthly feeds IFRS ledger applying the level of aggregation needed by GL.
With «IFRS ledger» we mean the portion of general ledger affected by the application of IFRS 17.
10. GL feeds individual reporting platform for local reporting (FS, notes to the accounts) and disclosure purposes.
11. Optionally CCH® Tagetik – IFRS Solution may feed the individual reporting platform, with information needed
for notes to the accounts and disclosure purposes, which are in addition respect to the ones already provided
by general ledger (flow #10).
12. Individual financial reporting platform feeds group consolidation system.
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The CCH Tagetik IFRS 17 Solution
SOURCE
SYSTEMS
G/L LEDGER
SUB-
LEDGERS
▪ Easy integration
with the existing
risk and finance
infrastructure
▪ An optimized
normalization
layer (UoA, etc..)
▪ Repository of
detailed
information
▪ Reconciliation,
data checks &
balancing
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▪ Liability for
Remaining
Coverage (LRC)
▪ Contract Service
Margin (CSM)
▪ Liability for
incurred claims
(LIC)
▪ PV of Future Cash
Flows Risk
Adjustment
▪ Onerous Contract
Test
▪ OCL Management
▪ CSM release,
CSM unlocking,
accretion,
reconciliation
▪ JE driven process
▪ Advanced
Analytical
capabilities
▪ GAM & VFA
reporting for PV
of future
cashflows, Risk
Adjustment,
CSM, OCL, LIC,
etc..
▪ PAA reporting for
LRC, LIC,
Onerous
contracts, etc..
▪ Comparison
reporting
between GAM &
PAA
▪ Impact Analysis
on FS (BS, P&L,
OCI)
▪ Easy integration
with external
systems with
reverse-mapping
capabilities (i.e.
GL)
▪ Integration with
3rd party
BI/Reporting
Tools
▪ Output in different
formats
Month
ly,
Quart
erly,
or
Annual D
ata
Pro
cessin
g
Preparation
of data &
normalization
Calculations
& Postings
Reporting &
Disclosure
Output
systems (Pillar
III, Consol, etc)
Meeting the IFRS17 requirements implies the following main steps:
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Deep Dive: CCH Tagetik IFRS 17 Solution
Preparation & Normalization of Data
Integration with the existing risk and finance infrastructure: Through an ETL, CCH Tagetik is able to
manage complex volumes from various systems.
An optimized normalization layer: CCH Tagetik simplifies the ability to prepare and normalize
information in a single layer. The aim of the collection layer is to more efficiently manage homogenization,
integration and data validation.
Repository of detailed information: The complete data set, with its entire history, is stored into the
system for audit and analysis purposes. Historical input data, calculation results and generated records are
all stored to ensure complete auditability and details for further analysis and reporting.
Reconciliation, data checks and balancing: The ability to drill-through is crucial to reconciling data with
input sources, in real time. In addition, data validation rules guarantee data is checked for both “technical”
errors (incomplete data or incorrect formatting) as well as logical/ business errors (e.g. balancing of
postings and variations from previous period).
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SOURCE
SYSTEMS
GENERAL
LEDGER SUB-
LEDGERS
Preparation
of data &
normalization
Calculations &
Postings
Reporting &
Disclosure
Output
systems (Pillar
III, Consol, etc)
Policies Data: Risk product, inception date, end date, contractual premium and frequency…
Reinsurance Treaties: Actual data regarding premiums, costs, fees.
Accounting Data: Policies covered, inception date, end date, reinsurance fee, payment
frequency, etc.
Claims Data: Actual data regarding claims, claims settlement…
Expected Cash Flows: Expected data regarding information mentioned above: claims, costs…
Discount Rates: Rates necessary to discount future cash flows and consider time value of the
money. (Can be market rates.)
Risk Parameters: Parameters necessary to calculate risk adjustment (e.g. % of future CF,
algorithm to apply...)
Accounting Data: Custom patterns to apply as an alternative to linear release based on the
passage of time (e.g. CSM release)
Input Elements
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Calculations● Cash Flows: Uploaded from actuarial systems.● Discounting: Once the cash flows are uploaded, CCH Tagetik performs discounting calculations.
CCH Tagetik is also able to calculate into subsequent events and play out various effects, suchthe unwinding effect.
● Risk Adjustments: When insurers have to input the risk rate that corresponds to the uncertain future cash flows, CCH Tagetik can calculate the related adjustments. Risk adjustment is calculated within our solution by applying the proper algorithm depending on the specific attributes of the various Units of Account (UoA). Input parameters to perform risk adjustment calculation are input from Customer’s risk actuarial systems. Risk adjustment an be optionally enabled/disabled depending on each single reason code.
● Present Value of Future Cash Flows: Calculated from the systems. As an alternative, oursolution is able to upload PV of future cash flows starting from actuarial system.
● Calculate Contractual Service Margin (CSM): CCH Tagetik is able to calculate the CSM throughthe actualization of the future cash inflows and outflows, netted by the calculated risk adjustment.This calculation can be done on aggregated portfolios of insurance contracts. For the variable feeapproach, the contractual service margin is adjusted to reflect the changes in the variable fee,which includes some changes in discount rates and other financial variables.
● Onerous Contract Test: Onerous testing is performed at initial recognition, to classify thosegroups of contracts which are likely to be onerous, and in subsequent measurements as well. Oursolution handles a specific “onerous contracts liability (OCL)” and its detailed components(accretion, release, unlocking, etc.); liability values are reconciled at each subsequentmeasurement. During the CSM calculation, the onerous contract test is performed and specifictreatment is applied for those groups of contracts which result as onerous.
● CSM Release, CSM Unlocking, Accretion and Reconciliation: CSM is calculated within our
solution considering the proper blocks, both at initial recognition and for all the subsequent
measurements. Our solution handles all the detailed components (accretion, release, unlocking,
etc.) and natively reconciles previous values of CSM with current values at each subsequent
measurement.
● PAA and GAM evaluations may run at once to enhance data processing performance:
Liability for Remaining Coverage (LRC) can be compared for both GAM and PAA methods,
enabling you to verify whether there are significant differences and determine whether to apply
PAA (under specific circumstances).
Postings● Process by event and with double entry accounting logic: The application allows users to
manage adjustments according to the accounting standard. These records can then be cross-checked and exported to transactional systems. Each detailed element may be mapped to aspecific chart of account (CoA). Our solution handles multiple CoA: the same set of elements(preconfigured and extensible on demand) may be mapped to different CoA for each legal entity.Customization of posting rules is available as well.
CCH Tagetik
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Deep Dive: CCH Tagetik IFRS 17 Solution
Running Calculations & Generating Required Journal Entries
SOURCE
SYSTEMS
GENERAL
LEDGER SUB-
LEDGERS
Preparation
of data &
normalization
Calculations &
Postings
Reporting &
Disclosure
Output
systems (Pillar
III, Consol, etc)
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Comprehensive data checks
Checks are performed throughout every step of the process, including the final approval steps of
reporting and disclosure. For example: last minute changes are easily detected and users can see and
compare different outputs and documents side by side.
Advanced analytic dashboards with Qlik Sense
The Qlik Sense connector links CCH Tagetik’s embedded financial intelligence to data analysis and
visualization allowing users to navigate pre defined operational reports and give to the end user the
possibility to create custom interactive dashboards for dynamic analysis of the data.
Financial datamart for BI tools
Besides Qlik Sense connector, our solution provides a specific financial datamart, which can work as a
source for inquiries with any suitable BI tool, depending on each customer’s needs.
Collaborative Office environment
CCH Tagetik Collaborative Office enables you to prepare all narrative outputs (MS Word and
PowerPoint) required by the new standard with extreme flexibility. While our IFRS 17 is a starter kit
solution, it’s also adaptable to any new disclosure requirements. The collaborative environment allows
users to edit the same document guided by workflow.
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Deep Dive: CCH Tagetik IFRS 17 Solution
Data Analysis & Investigation Calculation Results
SOURCE
SYSTEMS
GENERAL
LEDGER SUB-
LEDGERS
Preparation
of data &
normalization
Calculations &
Postings
Reporting &
Disclosure
Output
systems (Pillar
III, Consol, etc)
Report List
● GAM and VFA reports - Present Value (PV) of Future Cashflows, Risk Adjustment,
Contract Service Margin (CSM), Onerous Contract Liability (OCL), Liability for Remaining
Coverage (LRC), Liability for Incurred Claims (LIC)
● PAA reports - Liability for Remaining Coverage (LRC), Liability for Incurred Claims (LIC),
Onerous contracts
● Comparison reporting between GAM & PAA – Balance Sheet and Other Comprehensive
Income
● Impact Analysis on Financial Statements – Balance Sheet, Profit & Loss, Other
Comprehensive Income
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Easy Integration with any external systems
CCH Tagetik has its own embedded ETL component designed and optimized to support data integration
processes between CCH Tagetik and any kind of external data source.
• Data can be exported by downloading files or directly transferred via DB links or views. Data can be
exported back to general ledgers for transferring IFRS 17 postings, or they can be exported to other
environments, like sub-ledgers or actuarial systems.
• In cases where our customers already use CCH Tagetik (e.g. for IFRS consolidation or solvency), the
integration is even more straightforward.
Output your data in different formats
CCH Tagetik’s built-in ETL tool can output data as different file types (i.e. text - csv, XML - Excel) and
databases.
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Deep Dive: CCH Tagetik IFRS 17 Solution
Output Systems
SOURCE
SYSTEMS
GENERAL
LEDGER SUB-
LEDGERS
Preparation
of data &
normalization
Calculations &
Postings
Reporting &
Disclosure
Output
systems (Pillar
III, Consol, etc)
Complete an initial assessment (for IFRS 17 and IFRS 9)
Review your contracts
Plan your accounting policy decisions
Determine your needs for systems, processes and resources
Effective Date is January 1, 2022!
KPMG 2017, ifrs-17-insurance-contracts-accounting-new-perspective.pdf
Get Ready for IFRS 17!
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Complete Solution Guide
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Key Benefits Summary
• Starter kit solution
• Agility to adapt to new information / calculations
• Vendor agnostic integrationEasy to Implement
• Seamless integration to your existing environment
• Supports a centralized or decentralized deployment approach
• Robust ETL capabilities
Unified Platform
• Highly configurable
• Flexible data model, can be extended
• Upstream and downstream integration capabilityFlexible Solution
• Ability to process large data volumes
• Robust reporting and disclosure tools
• Supports operational efficiency and late adjustmentsHigh Performing Environment
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performance management software solutions that drive business results. With over 180 years’ experience in the markets we serve,
Wolters Kluwer is lifting the standard in software, knowledge, tools and education.
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Learn more about CCH Tagetik IFRS 17 Solution or sign up for a personalized demo at:https://www.tagetik.com/solutions/disclosure-compliance/ifrs-17
Our IFRS 17 solution has a proven track record of increasing efficiency, decreasing cost, and reducing risk!
2500+applications
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Over 20 years
experience
revenue from
61%
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