Deloitte Tools. Prophet IFRS4 Phase 2 Mini Library. Simon Walpole Insurance Industry Leader, Hong Kong

Transcription

1 Deloitte Tools Prophet IFRS4 Phase 2 Mini Library Simon Walpole Insurance Industry Leader, Hong Kong

2 Revisiting our Financial Architecture Actuarial Model as part of the overall architecture Group Reporting Hyperion Analytics QlikView / Tableau General Ledger Financial Data Warehouse Actuarial Prophet Market Data SAP Insurance Analyzer Analytics Layer Results Data Layer Process & Method Layer Source Data Layer Risk Financials Sales Asset HiPortfolio / Portia Policy Admin Life Asia / Polisy / ebao Claims Investments For information, contact Deloitte China. 2

3 Prophet Module Overview Scope of Methodology Exposure Draft Staff Papers Deloitte interpretation Scope of Calculations Non-par business In force and new business Balance sheet (including OCI) P&L (new and traditional formats) Transition (back-casting) Components Specification documentation Policy-level calculation module Cohort-level calculation module Checking spreadsheets User manual For information, contact Deloitte Consulting (Hong Kong) Limited. 3

4 Prophet Module Model Structure Cohort-level calculations: CSM One product with array variables to perform calculations at the portfolio level Q product Aggregation Use array variables to aggregate required results at the portfolio level Accumulation Policy-level calculations: BEL, RA, CSM run-off components Use calculation loops to calculate BEL and PV service measure under different noneconomic assumptions and discount rates C products For information, contact Deloitte Consulting (Hong Kong) Limited. 4

5 Prophet Module BEL, CSM and Risk Adjustment Flexible coding layer to link standard and tailored cashflows to new code Builds on top of standard Sungard libraries Similar level of integration work needed as for Prophet US GAAP modules Assumption management - retains style of the standard library Use of input variables for different assumptions Standard naming convention throughout New parameter table provided for IFRS assumptions Calculation loops Ensures consistent code across each calculation of BEL, PV service measure and Risk Adjustment under different assumption sets Standard example of Risk Adjustment Cost of capital approach, where the capital can be tailored (example uses Solvency II capital) Management of yield curves Leverages standard code, supports current and locked in curves at a given valuation date (historic or future) For information, contact Deloitte Consulting (Hong Kong) Limited. 5

6 Prophet Module CSM Unlocking, Loss Recognition and OCI Solution CSM unlocking at portfolio level Main CSM calculation is performed in an IFRS summary product at the portfolio level A flag in the model point is used to allocate policies to portfolios The initial CSM as a % of PV service measure may be a table input or calculated using the backcasting functionality Recognition and reversal of losses through CSM Supports latest IASB tentative decision to allow for losses or recovery of losses on onerous contracts If the CSM is floored at zero, the negative balance is tracked and run off in line with the PV service measure For ease of implementation, the model performs all calculations allowing the CSM to be negative and then applies the floor to the final reported value Optional OCI solution Since the use of OCI is optional, a switch is supplied to enable or disable it. The only balance sheet items affected are the OCI balance and the final IFRS liability all other calculations use common code whether or not the OCI solution is used For information, contact Deloitte Consulting (Hong Kong) Limited. 6

7 Prophet Module Backcasting A pragmatic approach to transition, taking into account available historic data The inforce model points as at the transition date are the starting point. Policy data and values are projected backwards, "backcast", to the inception date of the policies using realised assumptions Using cashflows based on the backcast policy data and the same historic assumptions, a BEL is determined at the point of sale (PoS) of the policy. Risk Adjustments are calculated at the beginning of the restatement period and are held constant for prior periods CSM is then determined at the PoS as the negative of the sum of the BEL and RA Inception Date Backcast assumption Beginning of comparatives Backcast assumption Transition Date Policy Data Risk Adjustment BEL CSM % of service measure For information, contact Deloitte Consulting (Hong Kong) Limited. 7

8 System Demo 8

9 IFRS_GRSPROF This is to show the calculation of profit, in traditional format though. Will continue to develop the library to cope with the newly proposed presentation format For information, contact Deloitte Consulting (Hong Kong) Limited. 9

10 IFRS_LIAB_NA_OD To show the building blocks of the IFRS reserve For information, contact Deloitte Consulting (Hong Kong) Limited. 10

11 OCI To show OCI is the difference of the IFRS liability under old and new discount rates. OCI together with the IFRS Gross Profit will become the Total Comprehensive Income (TCI) For information, contact Deloitte Consulting (Hong Kong) Limited. 11

12 IBC_CSM_AT_S Use the back-casting to estimate the CSM at the point of issue, which is the negative of the sum of BEL and risk adjustment For information, contact Deloitte Consulting (Hong Kong) Limited. 12

13 CSM_ADJ To demonstrate that CSM is used to absorb the variance in the BEL and risk adjustment when there is assumption change For information, contact Deloitte Consulting (Hong Kong) Limited. 13

14 IFRS_INVCOMP_DTH To show that the model is able to split the investment component For information, contact Deloitte Consulting (Hong Kong) Limited. 14

15 IFRS_INVCOMP_PP Currently the investment component is equal to the present value of future surrender outgo Can be easily changed after discussion with clients For information, contact Deloitte Consulting (Hong Kong) Limited. 15

16 IFRS Liability before Assumption Change A demo to show how each component of the IFRS liability will change when there is a change in non-economic and economic assumptions For information, contact Deloitte Consulting (Hong Kong) Limited. 16

17 Prophet Demo with Assumption Change To show the change in the following two assumptions: Renewal expenses [Table Param_IFRS] (from 17 to 21) Discount rates [Table Scenarios] (from 4 to 5) For information, contact Deloitte Consulting (Hong Kong) Limited. 17

18 Prophet Demo with Assumption Change Prophet Run For information, contact Deloitte Consulting (Hong Kong) Limited. 18

19 IFRS Liability after Assumption Change To show the change in the following two assumptions: Renewal expenses [Table Param_IFRS] (from 17 to 21) Discount rates [Table Scenarios] (from 4 to 5) For information, contact Deloitte Consulting (Hong Kong) Limited. 19

20 Prophet Module Wrap-up Field-testing ready Full in-force portfolios, not just new business Fully specified beyond just the theory Next steps HK par and discretionary DPF (including ALM elements) Par, unit-linked and other updates to the ED / staff papers For information, contact Deloitte Consulting (Hong Kong) Limited. 20

21 About Deloitte Global Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global ) does not provide services to clients. Please see for a more detailed description of DTTL and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's more than 200,000 professionals are committed to becoming the standard of excellence. About Deloitte in Greater China We are one of the leading professional services providers with 22 offices in Beijing, Hong Kong, Shanghai, Taipei, Chengdu, Chongqing, Dalian, Guangzhou, Hangzhou, Harbin, Hsinchu, Jinan, Kaohsiung, Macau, Nanjing, Shenzhen, Suzhou, Taichung, Tainan, Tianjin, Wuhan and Xiamen in Greater China. We have nearly 13,500 people working on a collaborative basis to serve clients, subject to local applicable laws. About Deloitte China The Deloitte brand first came to China in 1917 when a Deloitte office was opened in Shanghai. Now the Deloitte China network of firms, backed by the global Deloitte network, deliver a full range of audit, tax, consulting and financial advisory services to local, multinational and growth enterprise clients in China. We have considerable experience in China and have been a significant contributor to the development of China's accounting standards, taxation system and local professional accountants. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the "Deloitte Network" is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication For information, contact Deloitte China. 21