cch tagetik solution guide - crmt.com · deep dive: cch tagetik ifrs 17 solution preparation &...

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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”

CCH Tagetik

Complete Solution Guide|

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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CCH Tagetik

Complete Solution Guide

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.

|

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

CCH Tagetik


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

CCH Tagetik


▪ 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).

CCH Tagetik


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



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.

CCH Tagetik



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.

CCH Tagetik



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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CCH Tagetik

Complete Solution Guide

|

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

Wolters Kluwer enables finance, legal, tax, and healthcare professionals to be more effective and efficient. We provide information,

software, and services that deliver vital insights, intelligent tools, and the guidance of subject-matter experts. We understand the

complex challenges that face the Office of the CFO and translate that knowledge into intuitive, enterprise-scale CCH® Tagetik

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.

About Wolters Kluwer | CCH Tagetik

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

1000+customers

Over 20 years

experience

revenue from

61%

insurance/FS

250 +Insurance

Customers

Award WinningSIIA Codie - Best Financial Management Solution

BIG Awards for Business -

New Product of the Year

cch tagetik solution guide - crmt.com · deep dive: cch tagetik ifrs 17 solution preparation &...

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