When a UAE insurer talks about IFRS 17, the conversation is almost always about actuaries, models, and finance. The standard is filed mentally as an actuarial and reporting project, owned by the people who run the measurement models and close the books. That framing is why so many insurers found IFRS 17 harder and more expensive than expected, and why the difficulty did not end at first reporting. The binding constraint of IFRS 17 is not the actuarial model. It is the granularity of the underlying contract data, which is determined in the policy administration systems long before any model runs, and which the model cannot create if it was never captured.
This piece is a perspective on why IFRS 17 is a data-granularity problem before it is an actuarial one. The argument is opinionated. We are not arguing that the actuarial and finance work is trivial, or that insurers mismanaged the programme. We are arguing that IFRS 17's unit of account, contracts grouped into portfolios, divided by annual cohort and profitability, with cash flows attributable to the group, is a property the data either has or does not have; that this granularity is set in the policy systems, not the actuarial layer; and that an insurer whose policy data does not carry it is feeding its models reconstructions and allocations, which weakens every figure and every disclosure built on top. The model can only measure what the data can express.
The audience for this analysis is CFOs, chief actuaries, finance controllers, and reporting and data leads at UAE insurers, takaful operators, and TPAs who delivered IFRS 17 and find each reporting cycle still strained, with results that are hard to explain back to source. The useful diagnostic question is not "does our actuarial model run" but "does our policy data carry cohort and profitability classification at the contract level, or is the IFRS 17 unit of account being manufactured downstream every cycle".
The Granularity Ladder IFRS 17 Requires
Below is the ladder of data granularity IFRS 17 depends on, from the aggregate balances pre-IFRS-17 reporting often lived on up to an auditable contractual-service-margin movement. The point is not that any rung is conceptually obscure; it is that the standard's measurement unit sits at the cohort rung, that most insurers' policy data stops below it, and that everything above a missing rung is reconstructed rather than measured. Tap any rung to see what IFRS 17 needs there, where the data falls short, and what capturing it changes.
The IFRS 17 data-granularity ladder
Tap a rung for what the standard needs, where data falls short, and what changes
Why Granularity Is Set Before the Model Runs
The reason granularity is the binding constraint is the nature of the standard. IFRS 17 became effective on 1 January 2023, and in the UAE the CBUAE's insurance Financial Reporting and External Audit Regulation took effect on 30 April 2024, so the standard and its local supervisory frame are both fully in force. IFRS 17 measures on a defined unit of account: contracts organised into portfolios of similar risk managed together, divided by annual cohort and by whether they are onerous, have no significant possibility of becoming onerous, or fall in between. That unit is not an actuarial choice; it is the structure the standard requires the data to be in. If the policy system does not carry the attributes that define the cohort and the profitability bucket at the contract level, the unit IFRS 17 measures on does not exist in the data, and the model is forced to approximate it rather than measure it.
This inverts where insurers expected the difficulty. The actuarial model is sophisticated and visible, so it attracts the attention and the budget. But a sophisticated model fed data that cannot express the standard's unit of account produces results that are only as sound as the reconstruction underneath them. The cohort rung is where most UAE insurers break, because legacy policy systems were built to administer policies and produce aggregate financials, not to retain issue-cohort and profitability classification per contract. The standard's measurement unit was simply never a field, and a field that was never captured cannot be recovered by the model that needs it.
This is why the failure is structural rather than an actuarial-capability problem. A strong actuarial function can run the measurement perfectly and the insurer can still struggle every cycle, because the function is measuring on reconstructed groupings and allocated cash flows rather than attributed data. The insurer exposed here is not the one with weak actuaries; it is the one whose policy systems stop below the cohort rung, so the IFRS 17 unit of account is manufactured downstream every reporting period and cannot be walked back to source when an auditor or the CBUAE asks.
The shift in one observation
IFRS 17 read as an actuarial and finance project produces investment in models and close processes. Read as a data-granularity problem, it produces investment in the policy systems where the unit of account is, or is not, captured. The insurers for whom every cycle is a strain are usually the ones who strengthened the model. The ones for whom it is routine are the ones who captured the granularity at source.
Where the Model-First Model Breaks
Treating IFRS 17 as a model-and-finance project breaks in four predictable places against the standard's data demands.
Built from aggregate, not contract
Policy and finance systems built to produce aggregate balances cannot, by summarising further, produce the contract-level structure IFRS 17 needs. Starting from the aggregate rung means reconstructing everything the standard requires from a granularity that was never retained.
Grouping maintained by hand
When the policy system does not carry portfolio-defining attributes, the IFRS 17 grouping becomes a manual mapping kept in a spreadsheet beside the system, fragile and undocumented, and hard to defend when the basis of grouping is questioned.
The cohort unit does not exist
Annual cohort and profitability classification is the standard's measurement unit and is rarely a contract-level field in legacy policy systems. The unit IFRS 17 measures on therefore does not exist in the data and is approximated by the model rather than measured from source.
CSM that cannot be walked back
If the lower rungs are weak, the contractual service margin is the output of a model fed reconstructed data and its movement cannot be traced to source. An unexplainable CSM movement is an audit and supervisory problem even when the number looks reasonable.
The Numbers
Two Ways to Approach IFRS 17
The difference between insurers for whom IFRS 17 is routine and those for whom every cycle strains is whether the standard's granularity was captured at source or is manufactured downstream.
| Dimension | Model-first | Granularity-first |
|---|---|---|
| Where investment goes | The actuarial model and close process. | The policy systems where the unit of account lives. |
| Portfolio grouping | A manual mapping beside the system. | Derived from attributes carried on the contract. |
| Cohort and profitability | Approximated by the model. | Captured at contract level, the unit exists in data. |
| Cash flows | Allocated estimates fed to the model. | Attributed to the IFRS 17 group as they occur. |
| CSM movement | Reconstructed and hard to explain. | Walked back to source by documented lineage. |
A sophisticated IFRS 17 model fed data that cannot express the standard's unit of account produces results only as sound as the reconstruction beneath them. The insurers for whom every cycle is a fight are rarely short of actuarial skill; their policy data stops below the rung the standard measures on.
What Granularity at Source Looks Like
The pattern in insurers for whom IFRS 17 reporting is routine is recognisable. Portfolio-defining attributes are carried on the contract in the policy system, so grouping is derived from data rather than maintained as a spreadsheet beside it. Annual cohort and profitability classification exists at the contract level, so the IFRS 17 unit of account is present in the data rather than approximated by the model. Premiums, claims, and expenses are captured with the keys that attribute them to the IFRS 17 group as they occur, so the model receives attributed cash flows rather than allocations. The contractual service margin movement can be walked from the disclosure down through cash flows, cohorts, and contracts, so it is defensible by lineage rather than reconstruction under audit. The actuarial model still does demanding work; it simply does it on data that can express what the standard measures.
This does not necessarily mean replacing the policy administration system already in place. In many insurers the cohort and attribution capture can be built around the existing system so the granularity is added at source without a full replacement. Replacement becomes the better option mainly where the existing system structurally cannot carry contract-level cohort and profitability classification. Which applies is specific to the systems in place, and is established in scoping before any build commitment.
How This Sits Alongside the Insurer's Own Responsibilities
The configuration keeps a clear separation. The insurer owns its IFRS 17 application, its actuarial methodology and assumptions, its accounting judgements, its disclosures, and its own compliance with the standard and the CBUAE regulation. The software is the instrumentation: capturing the contract-level granularity the standard's unit of account requires so the model is fed attributed data rather than reconstructions.
This is the role BY BANKS is positioned for. We are an independent software engineering company based in the UAE. We design and build software and hand it over to the insurer that runs it. We do not perform actuarial work, set IFRS 17 methodology or assumptions, make accounting determinations, act as auditors, or act for or on behalf of the CBUAE or the IFRS Foundation, and we are not affiliated with or endorsed by any of them. The insurer owns its application, its methodology, its disclosures, and its own compliance; we build the instrumentation that gives the data the required granularity. The accountable party leads and owns the obligations; we build to their direction.
Where This Analysis Is Useful
The conversations where this perspective is most useful tend to be at three moments: an insurer for whom every IFRS 17 cycle is a strain despite a capable actuarial function; a finance or data lead who realises the cohort unit is manufactured downstream each period; or a CFO whose CSM movement is hard to explain back to source under audit. The honest answer is usually the same: the binding constraint is data granularity set in the policy systems, the model cannot create what was never captured, and the durable fix is capturing the unit of account at source.
For broader related work, see our perspective on why claims in Dubai are decided at the point of care and our perspective on why UAE banks keep losing money on analytics they already bought. The applied work sits across our IFRS 17 reporting software, insurance policy administration, and CBUAE reporting software capabilities, within the broader insurance software practice and our operational platforms work. Get in touch if a 45-minute conversation about a specific IFRS 17 data picture would be useful.
Frequently Asked Questions
No. We are an independent software engineering company based in the UAE. We design and build software and hand it over to the insurer that runs it. We do not perform actuarial work, set IFRS 17 methodology or assumptions, make accounting determinations, act as auditors, or act for or on behalf of the CBUAE or the IFRS Foundation, and we are not affiliated with or endorsed by any of them. On any engagement, the insurer owns its IFRS 17 application, its methodology, its disclosures, and its own compliance. We build the instrumentation that gives the data the required granularity; the insurer and its actuaries own the measurement.
They are summarised from IFRS 17 as published and from the CBUAE insurance Financial Reporting and External Audit Regulation, not reproduced and not advice. The authoritative requirements, including all conditions and exceptions, are in the standard itself and the CBUAE instruments. Insurers should rely on the standard, the regulation, and qualified actuarial, accounting, and audit advice for their specific application, not on this summary.
Reporting under IFRS 17 proves the close can be produced; it does not prove the unit of account exists in the data rather than being reconstructed each cycle. The exposure this addresses is a CSM movement that is produced on time and cannot be walked back to contracts and cash flows under audit. If each cycle strains and results are hard to explain to source, the model is not the gap; the upstream granularity is.
Often not. In many insurers the cohort and attribution capture can be built around the policy system already in place, adding the granularity at source without a full replacement. Replacement becomes the better option mainly where the existing system structurally cannot carry contract-level cohort and profitability classification. Which applies is specific to the systems in place and is established in scoping before any build commitment.
It is sequenced and does not require pausing reporting. The usual starting point is the cohort rung for the portfolios where the reconstruction burden and audit exposure are greatest, captured at source first so the highest-risk groups stop being manufactured downstream. Cash-flow attribution and the remaining portfolios follow. The order is driven by where the granularity gap and the audit exposure coincide, which scoping establishes for the specific insurer.
IFRS 17 is widely treated as an actuarial and finance project and is in practice constrained by the granularity of the underlying contract data, decided in the policy systems before any model runs. The standard's unit of account, contracts grouped into portfolios, split by annual cohort and profitability, with attributed cash flows, either exists in the data or is reconstructed every cycle, and a sophisticated model fed reconstructions is only as sound as what it had to assume. With IFRS 17 effective since 1 January 2023 and the CBUAE insurance reporting regulation in force since 30 April 2024, the insurers for whom reporting is routine are the ones that captured the granularity at source. The build is software work; the actuarial methodology, the accounting judgements, the disclosures, and compliance with the standard and the regulation remain entirely the insurer's, and the system simply gives the data the structure the standard measures on so results are defensible by lineage rather than reconstruction.
References to IFRS 17 and the CBUAE insurance Financial Reporting and External Audit Regulation are descriptive of publicly available official sources and are summarised, not reproduced. Figures cited (IFRS 17 effective 1 January 2023; CBUAE insurance Financial Reporting and External Audit Regulation C 5/2023 effective 30 April 2024; 59 licensed UAE insurers in 2024 with the stated breakdown; 2024 gross loss ratios of 68.9% overall, 77.4% health, 58.6% property and liability) are drawn from public sources listed on our Sources and Data page; the granularity ladder is an observational model rather than an accounting methodology and represents no specific insurer or system. BY BANKS is an independent software engineering company; we do not perform actuarial work, set IFRS 17 methodology or assumptions, make accounting determinations, act as auditors, or act for or on behalf of the CBUAE or the IFRS Foundation, and we are not affiliated with or endorsed by any of them. On any insurance engagement, the insurer owns its IFRS 17 application, its methodology, its disclosures, and responsibility for its own compliance. This article is not actuarial, accounting, audit, or legal advice; insurers should obtain qualified advice for their specific obligations. Public sources used in this piece are listed on our Sources and Data page.
Ready to Build Something?
If this resonated, let's talk about how we can apply these ideas to your business.
Start a Conversation