The insurance industry has seen significant innovation in modeling techniques and tools in recent years, driven by a surge of new regulations, standards, and technologies.
A wave of new regulations and standards in the insurance industry, coupled with innovative developments in the technologies that underpin the insurance ecosystem, have radically altered the landscape for both carriers and their technology providers.
With multiple new complex demands placed upon actuarial, finance and IT teams as a result, implementing these new requirements has led to comprehensive overhauls in insurance accounting practices, approaches and infrastructure. Modeling techniques and solutions have evolved in novel ways to keep pace with the complex demands of this new global regulatory landscape, and many of these efforts are beginning to bear fruit.
With the official implementation deadline for IFRS 17 now behind insurers in most countries, many of the systems and solutions introduced for compliance with the new standard have begun to stabilize post-implementation. The resulting operational savings and strategic advantages are beginning to crystallize, with many already making valuable resource savings across model run time and compute power, for instance. These tangible benefits will only expand throughout 2025 – particularly for insurers in Europe, Canada, Australia, and large parts of Asia, where carriers largely adhered to the January 2023 deadline.
Overcoming Challenges in Insurance: Data Management and Technology Integration for New Accounting Standards
Across all insurance segments, data management, system integration and resource have been among the greatest challenges involved with the implementation of this significant new accounting standard, with carriers turning to advanced technologies and modeling tools to support the new demands of compliance.
Technology providers have responded to these needs by developing tools and solutions that are flexible enough to simulate multiple methodologies, and capable of identifying the best approach to streamlining IFRS 17 closing processes. Given the requirement for collaborative working, solutions need to be built in such a way that they are accessible to multiple users across actuarial, finance and accounting teams – which, for larger firms, makes cloud deployments the approach of choice.
Work on the Insurance Capital Standard meanwhile continues, as it aims to unify global capital requirements by aligning methodologies for assessing risk, capital resources, and group solvency. While similar in concept to Europe’s Solvency II framework, its structure has a number of key differences, such as a broader risk stress approach, and adjustments in valuation methodology.
Just as with IFRS 17, differing timetables and local variations will continue to present an ongoing challenge for insurers throughout 2025 – something that only technology built to accommodate those changes can handle.
Against this backdrop of significant and constant change, technology providers must continue to innovate, leveraging new tools for smarter decision-making, improved risk assessment, and more efficient processes.
Artificial intelligence, for instance, can help actuaries process and analyze data more efficiently than ever before, with AI-powered predictive models able to estimate potential losses, and aid insurers in decision-making.
AI will not replace actuaries of course, but we believe it can transform their day-to-day work, making them more agile and effective, as routine tasks such as data pre-processing, model fitting and report generation can largely be automated – leaving actuaries to focus on developing a more strategic position in their organizations.
While AI models will bring much greater productivity in 2025, they also run the risk of introducing new sources of uncertainty, so it’s important that actuaries take time to understand the limitations and assumptions of AI algorithms. Actuarial models need to be fair and unbiased – particularly when it comes to pricing and underwriting. This is important both from the point of view of ethics, as well as compliance with a raft of regulatory requirements – requirements that appear to grow more demanding for insurers by the year.
The changes brought about by new regulation across the insurance industry in recent years have been wide-ranging and significant. In 2025, technological tools must continue to be flexible enough to address the ongoing, shifting goals of regulators around the globe. As a new year begins, leading-edge insurers, and the technology partners that work with them, will be keeping watch as that landscape evolves, and will continue to leverage the latest advances in technology to stay ahead of the curve.
RNA Analytics is a global actuarial and risk management consulting firm headquartered in Reigate, United Kingdom. The RNA Analytics Team is located across the United Kingdom, Spain, Japan, Korea and Hong Kong, and provides actuarial and risk management software and consulting services to financial institutions around the world.
About The Author: John Bowers, Head of Product
- Fellow of the Institute of Actuaries
- 14 years post-qualification
- System Development Actuary, Royal Liver Assurance UK
- Former Head of Consulting EMEA, RNA