Insurance Authority. Future Task Force HKRBC/IFRS interaction. 26 October 2018

Transcription

1 Insurance Authority Future Task Force HKRBC/IFRS interaction 26 October 2018

2 Key Objectives of HKRBC and IFRS 17 To protect Hong Kong policyholders and the insurance industry To continue promoting the competitiveness of the Hong Kong insurance industry HKRBC IFRS 17 A risk based three-pillar approach, covering quantitative aspects, qualitative aspects on enterprise risk management (ERM) and own-risk and solvency assessment (ORSA) and disclosure. To standardize insurance accounting globally to improve comparability and increase transparency To provide users of accounts with the information they need to meaningfully understand the insurer s financial position, performance and risk exposure Three measurement models: BBA, VFA and PPA Page 2

3 IFRS 17 Implementation Key components Actuarial model / integrated solution (DSP) Many of the key focus areas and assumptions of IFRS 17 are closely linked to HKRBC and IFRS 9 Hong Kong Risk Based Capital Standards (HKRBC) Define the accounting policy Measurement & actuarial model/ integrated solution Transition, presentation & disclosure Definition & scope Separation Recognition Level of aggregation 04 Actuarial model/ integrated solution Measurement model Expected cash flows Attributable expense Discount rate Time value of options and guarantees Risk adjustment for non-financial risk Contractual service margin (CSM) Measurement Initial / subsequent measurement Onerous contract Reinsurance Transition Disclosure IFRS 9/ 17 interactions Presentation Investor story IFRS 9 Financial instruments IFRS 13 Fair value measurement Interaction with other standards: IFRS 15 Revenue from contracts with customers Relevant standards & local regulation Page 3

4 EY s top 4 observations related to the implementation of HKRBC and IFRS 17 in the Hong Kong industry Implementation timeline 1 Financial impact for HKRBC/IFRS 17 4 Professional resources need 2 Complexity in data, systems and processes 3 Page 4

5 Implementation timeline Bottleneck timeline in implementing HKRBC/IFRS 17 & 9 HKRBC QIS 1 HKRBC QIS 2 HKRBC QIS 3 Pillar 1 legislative process Pillar 2 effective ORSA report first submission HKRBC effective HKRBC IFRS IFRS 9 comparative period IFRS 17 standards issued IFRS 9 effective date IFRS 9 deferred comparative period IFRS 9 deferred effective IFRS 17 effective At an educational meeting on Wednesday 24 October, 2018, the IASB discussed how they might evaluate at future meetings whether to make limited changes to IFRS 17 for 25 areas of concern and implementation challenges raised by stakeholders. While no decisions were made, the IASB appears to be open to considering limited changes in the coming months including considering a delay to the current IFRS 17 implementation date of 1 January 2021, and possibly also of IFRS 9. Page 5

6 Professional resource need Skilled individuals are limited in the Hong Kong industry Others resources: Business Operation: Brand management, Channel and marketing, etc. Project Management Office (PMO) Investment HKRBC IFRS 17 Common Solvency Profit Investor story Actuarial HKRBC IFRS 17 Common PCR, TVOG CSM, model design, product Risk HKRBC IFRS 17 Common ORSA Liabilities valuation Actuarial Modeling Risk Risk culture : Critical and with big shortage of experienced resources HKRBC/IFRS IT Finance HKRBC IFRS 17/9 Common Asset breakdown BBA/VFA/ PPA; FP&L Business Planning and forecasting HKRBC IFRS 17 Common Prophet and other systems Finance, DSP and Subledger ETL, control and quality Financial Page 6

7 COMPONENTS Complexity in data, system and process The quality of implementation is important in avoiding manual workaround Both HKRBC and IFRS 17 will require changes in, System and Process from the existing solvency and IFRS framework. However, the effort required for IFRS 17 will be much more complex and requires more investment in resources and money. Source sources Transformation ETL Results Integrated system solution GL/ Consolidation ECC / BPC Reporting/ Analytics BI & Reporting Layer EY high level conceptual design Policy admin systems Non- Core Reference Core and Non core Tech Validation + Business Logic Reference Storag e Calculation engine Actuarial BEL + DCS Risk Adj \\\\\\\\\\\\\ IFRS Cash flow Cohorts Model Assump. Calculation and accounting rules engine results Source data reconciliation Investment component Risk adjustment CSM Accounting Technical sub ledger, accounting rules Assetdependent CF inputs New impairment Accounting rules engine Reporti ng datamarts BPC GL MRA FAM IFRS P&L Balance Sheet IFRS 17 Disclosures HKICO Local Regulatory Local GAAP LEGEND Sources Technical / Business validations base tables / Enhancements Engines New components Control Framework flow quality, reconciliation, audit & control IFRS 17 Control Framework Security and data privacy Master data management and data retention Mgmt. Information Page 7

8 Financial impacts under HKRBC and IFRS 17 Understand the differences to identify common levers to manage both balance sheets Key known issues common to HKRBC and IFRS 17 HKRBC balance sheet Issue Similar? Assets Liabilities 1 Discount rates Surplus PCR Other Liab. MVA MOCE 2 TVOG TVOG + BEL 3 Contract boundaries HKFRS balance sheet 4 MOCE/RA Assets Liabilities Equity CSM Other Liab. 5 PCR/CSM MVA/Amortized Cost Risk Adj. TVOG + BEL Page 8

9 Key take-away IA, industry bodies, professional bodies and insurers to work closely together Assess the uncertainty Assess the similarities/ dissimilarities HKRBC IFRS9 IFRS17 Assess the available resources HKIO HKFRS Page 9

10 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young Advisory Services Limited All Rights Reserved. APAC No ED 1018 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com