One set of numbers.

Three reporting cycles into IFRS 17, most UK insurers now need to report and analyse the same business on multiple different calculation and reporting bases: IFRS 17, Solvency UK, and the operating, capital and cash measures that investors follow. IFRS 18 being introduced in January adds another layer of interpretation.

We sat down with Graeme McKane, Senior Manager at Monocle Solutions, who works on finance transformation across insurance and banking, to discuss what alignment looks like and what "one set of numbers" should mean in practice – including why it matters most under stress, and where a finance function should start.

Q: "One set of numbers" is a phrase most insurance CFOs are probably familiar with. What does it mean when IFRS 17 and Solvency UK are designed to give different answers?

Aligning to a single set of numbers is a popular goal, and most people hear it as one system or one data warehouse. That is part of it but is probably one of the easier aspects. The different standards and principles mean that these numbers are meant to differ, with the real work being creating a process that makes it easy to explain why they differ.

For insurance liabilities, both solvency and IFRS reporting bases require creating discounted best estimates of future cashflows, and where they differ is mostly inside the models and at the assumption steps: contract boundaries, allowable expenses, the discount rate, the risk adjustment against the risk margin, and the contractual service margin. The European Insurance and Occupational Pensions Authority (EIOPA) 2024 review of 53 European groups found that around two thirds used almost the same contract boundaries under both regimes, but fewer than half used almost the same cash flows, mainly because of expenses. For annuity writers the discount rate and matching adjustment / illiquidity premium are a large factor. In one large UK writer's 2025 solvency report, the economic assumptions line is worth about £3.3 billion in the bridge from IFRS liabilities to the Solvency best estimate.

In short, “one set of numbers” means having the same underlying policy, asset and assumption data feeding every model, with each point of difference documented, and one controlled set of adjustments applied consistently on top.

Q: The bases also look at the business at different levels of detail. How much does that matter?

Granularity is a significant challenge when aligning bases. IFRS 17 groups contracts by portfolio, annual cohort and profitability. Solvency UK works by homogeneous risk group and line of business, the matching adjustment by portfolio, and the liquidity returns need asset-level cash flows. Additionally, teams also need to analyse by reinsurance counterparties, specific schemes, inflation bands, and by product features. If each basis takes its own extract at its own grain, the numbers diverge at the outset and make reconciling after the fact impossible.

Where possible, we recommend holding data once at an aligned grain, usually the policy or model point (where possible) and the individual asset, carrying the attributes each basis needs, and aggregating up. For large insurers this can prove challenging from a data volume perspective, and that is where agreeing a shared lowest granularity is key. Any total can then be traced to the same records, and the next regulatory change or reporting requirement becomes a new aggregation instead of a new data build.

Q: Most insurers publish a bridge from IFRS equity to Solvency own funds. Is that enough?

It explains the balance, but rarely the movement, and boards and analysts are typically after the “why”, not just the difference itself. IFRS 17 tells that story through the roll-forwards of the best estimate, risk adjustment and CSM. Solvency UK tells it through the analysis of change in own funds and the SCR. The two are usually built by different teams, with different step orders and definitions.

Bridging the bases means aligning not just the underlying data but also a shared analysis of change across bases, this includes extending the movement breakdown to assets and capital metrics as well. This way each step reconciles and what remains is a known and apparent set of differences driven by basis-specific steps.

Q: You've mentioned that all this matters most in a stress scenario. Why?

A market shock reaches each basis at a different time and through different mechanics. In the first stage of the PRA's 2025 life insurance stress test, rates fell and spreads widened sharply, yet aggregate Solvency coverage fell by only about five points, because wider spreads increase the matching adjustment while the fundamental spread stays fixed. The damage came later, from downgrades, defaults and falling property values, taking coverage across the 11 participating insurers from 185% to 154%. IFRS 17 discount rates move with the assets too, but without the same mechanics, so the IFRS result can respond quite differently.

Liquidity moves faster, because collateral calls arrive within days. In the Bank of England's 2024 system-wide exercise, some insurers sold credit they thought was at risk of downgrade, partly because a downgrade would raise their capital requirement. The single event moved the matching adjustment, the SCR, the collateral pool and the IFRS result at the same time.

Q: So what should the process behind this look like?

Today, in many insurers, each basis runs its own chain, with its own extracts, data checks, adjustments and spreadsheets. Stress results are produced separately for capital, for IFRS and for liquidity, and stitched together afterwards.

Our view is that insurers need to streamline, align and automate these processes into a single central stream. Data is loaded once at the aligned grain and controlled once. Stresses and adjustments are defined in a central place, applied to that shared data so each one has a consistent impact wherever it lands. The Solvency, IFRS and liquidity balance sheets then move together in an integrated way.

Q: Where does pricing fit in?

In our experience, pricing is sometimes difficult to align given the natural timing differences to reporting. New business is usually priced to a capital-based return hurdle, while IFRS 17 shows how that profit emerges through the CSM, or doesn't if a group is onerous at the outset. Pricing should ideally draw on the same data and assumptions as reporting, and each product or bulk annuity deal should be tested on both bases before it is signed. This eliminates questions about large pricing to reporting misalignments or differing profitability outcomes under the two models.

Q: For a CFO who wants to make progress before year end, where should they start?

Take last year's bridge from IFRS equity to own funds and trace each line back to its data, model, assumptions and sign-off. Then analyse one realistic stress through every view, from the matching adjustment and SCR to the IFRS result, collateral and cash. The places where the answer is not immediately clear or is longest to determine are the areas to focus on first. Quickly tackling small pieces will lead to larger alignment and provide incremental immediate benefit.

Finally, don’t just align the data and processes but the roles and people as well: give someone ownership of the whole, as well as each reporting base. Rarely is a new platform and migration required to attain this harmonisation, the real key is to bring the processes behind each basis into one controlled, automated stream.

How Monocle can assist

Monocle works with finance, actuarial, risk and data teams at insurers and banks on the data foundations and processes behind their published numbers. We are independent of the software vendors, so our focus is the foundation: a single, automated stream with data held once at an aligned grain, and stresses and adjustments applied consistently across the Solvency, IFRS and liquidity views.

For insurers, we typically start by tracing an existing bridge back to its data, models and sign-offs, then help firms prioritise the gaps that matter most under stress and put in place the lineage, controls and ownership needed to close them.

Sources

•    Bank of England / PRA, Life Insurance Stress Test 2025: results, 17 November 2025.

•    Bank of England, System-wide exploratory scenario exercise: final report, 29 November 2024.

•    PRA, PS15/25 Closing liquidity reporting gaps and streamlining Standard Formula reporting, 30 September 2025.

•    EIOPA, Report on the implementation of IFRS 17 (EIOPA-BoS-24/111), April 2024.

•    IFRS Foundation, IFRS 18 Presentation and Disclosure in Financial Statements; UKEB adoption, 10 December 2025.

•    UK life insurers' 2025 annual reports and solvency and financial condition reports (individual firms are not named in the text).