IFRS 17: For Life Insurers

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1 IFRS 17: For Life Insurers 26th Annual Insurance Conference Tuesday, November 28, 2017 kpmg.ca/insuranceconference2017

2 KPMG IFRS 17 & 9 Benchmarking Survey Overview In which country is your company headquartered? Is your company a stand-alone entity or part of a large group of companies? Parent company of a group 43% Subsidiary of an insurance group 35% Stand-alone 5% Other 2% Subsidiary of a financial services group 15% 2

3 KPMG IFRS 17 & 9 Benchmarking Survey Overview What is your company s annual global premiums? (in US$) What type of insurer is your company predominantly? $500m or less 22% Insurance and Reinsurance 11% More than $10b 39% Life and Health insurer 36% $501m to $1b 8% Both Life and Health and P&C 36% $5.01b to $10b 11% $1.01b to $5b 20% Reinsurance 7% P&C insurer 10% 3

4 How to vote Using your phone text KPMG1570 to the number to join the session For each of the poll questions, text A, B, C, D, etc. to KPMG1570 Your responses are completely anonymous. *Standard text messaging fees will apply. 4

5 Which IFRS 17 project phase is your company in? A) Haven t started yet B) Following the developments C) Project start-up phase D) Impact assessment phase E) Design phase F) Implementation phase 5

6 KPMG IFRS 17 Global Results Haven't started yet 7% Which IFRS 17 project phase is your company in? Following the developments Project start-up phase 21% 24% Impact assessment phase 33% Design phase 13% Implementation phase 1% 6

7 How many policy decisions are on your company s critical path between now and planned parallel runs? A) I haven t pulled together a comprehensive list as of yet B) 5 10 C) D) More than 20 7

8 Discount determination approaches Example bottom-up and top-down approach 5.5% Yield based on actual assets held or a reference portfolio = 5.25% 5.0% Market risk premium for expected credit losses = 1.0% 4.5% 4.0% 3.5% Bottom-up approach = 3.5% Market risk premium for unexpected credit losses = 0.9% Illiquid risk-free yield curve Liquidity premium = 0.5% Top-down approach = 3.35% 3.0% Risk-free rate = 3.0% 8

9 Which of the following policy choices/key judgments do you envisage having the most significant impact on your IFRS 17 results? A) Transition adjustment B) Discount rate methodology C) Application of the variable fee approach D) Disaggregation of insurance finance income or expense 9

10 Transition: An overview Full retrospective approach is required but practical expedients are available. 10

11 Application of the Variable Fee Approach What are direct participating contracts? 11

12 Which business area do you expect to be the most impacted by implementation of IFRS 17 and 9? A) Product design and pricing B) Costs and cost allocation C) Investment policy D) Risk management E) Other 12

13 KPMG IFRS 17 Global Results Please identify the top 4 business areas you expect to be most impacted by the implementation of IFRS 17 and 9. Product design and pricing 21% Costs and cost allocation 18% Investment policy 16% Risk management 15% Reinsurance strategy 9% Executive compensation 6% Distribution strategy 5% Mergers and acquisitions 5% Other 2% Do not expect significant business impacts 1% 13

14 The wide-ranging business implications for insurers Financial reporting Presentation & disclosure Management information Product design and pricing Capital Tax Financial planning & analysis Volatility of results Reinsurance strategy Data & systems People & processes Investment management & ALM Employee compensation 14

15 Do you currently expect to experience significant resource challenges in implementing IFRS 17 and 9? A) Yes securing adequate budget and/or skilled people B) No I have secured the budget AND personnel I need C) I haven t defined my requirements 15

16 KPMG IFRS 17 Global Results Yes - securing adequate budget and/or skilled people 88% Do you currently expect to experience significant resource challenges in implementing IFRS 17 and 9? No - I have secured the budget and personnel I need 10% I haven't defined my requirements 2% 16

17 Are you exploring any related opportunities while implementing the new standards? A) No Only compliance with IFRS 17 and 9 B) Yes Finance transformation C) Yes Process optimization D) Yes Actuarial transformation E) Yes Systems modernization F) Yes Cost reduction G) Yes Other 17

18 KPMG IFRS 17 Global Results No Only compliance with IFRS 17 and IFRS 9 31% Are you exploring any related opportunities while implementing the new standards? Yes Finance transformation Yes Process optimisation Yes Actuarial transformation Yes Systems modernization 41% 45% 45% 47% Yes Cost reduction Yes Robotics and digital labor 10% 13% Yes Others 4% 18

19 Contact us Stephen Smith Partner T: E: Dana Chaput Accounting Change Leader T: E: Nunzio Tedesco Partner, Tax T: E: Alison Rose Senior Manager, Life Actuarial Practice T: E: 19

20 Thank you!

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