IFRS 17 - INSURANCE CONTRACT ACCOUNTING AN IN-DEPTH EXAMINATION FOR LIFE, PROPERTY AND CASUALTY INSURERS 9:00 a.m. 9:05 a.m. Opening Remarks from the Chair Janice Deganis, Partner, Ernst & Young LLP June 11-13, 2019 Toronto Conference Agenda Program June 12 9:05 a.m. 12:15 p.m. - IFRS 17 Executive Summary (Available Separately) 9:00 a.m. 9:45 a.m. Explaining the New Results to the Board and Stakeholders Elaine Hultzer, Partner, Deloitte LLP Identifying top line issues of importance to the Board and external stakeholders -investors revenue & profit profile, capital, dividends -business impact financial performance, products -regulatory capital and tax (income and premium taxes) Internal stakeholders management information Key IFRS 17 decisions that affect high level decision making -lines of business impact -level of aggregation decisions impact on systems and operations Will increased comparability and transparency occur? 9:45 a.m. 10:30 a.m. Internal Controls and Risk Oversight Maisie Ho, Senior Manager, Ernst & Young LLP Transition considerations: Validation of Day 1 Data, Systems and Processes Expected changes to business-as-usual controls Designing control documentation with auditability Using analytics in controls 10:30 a.m. 10:45 a.m. Morning Networking Break 10:45 a.m. 11:30 a.m. Modelling and IFRS 17 Trevor Howes, Vice President and Actuary, Moody s Analytics/GGY AXIS IFRS 17 impact on actuarial models and processes Where organizations are finding challenges Performance and runtime concerns Integrating accounting and actuarial needs How data challenges are being tackled Model risks and model governance
11:30 a.m. 12:15 p.m. ALM and Impact on KPIs Bruce Langstroth, Actuarial Associate Partner, Ernst & Young LLP Revisiting the balance sheet and ALM How will IFRS 17 alter ALM What constraints does IFRS 17 remove/introduce What risks can be hedged What risks can t be hedged What choices are available under IFRS 17 to manage these risks -P&L vs OCI -top-down vs bottom-up -methodology choices -modelling credit spreads Telling your story under IFRS 17 What is staying the same What is changing Impact on current KPI s -IFRS equity -operating result -combined ratio -gross written premium -solvency ratio Potential new KPI s arising from IFRS 17 information 12:15 p.m. 1:15 p.m. Luncheon 1:15 p.m. 2:15 p.m. IFRS 17 Amendments and Transition Resource Group Issues Update Amal Rajwani, Principal, Actuarial Consulting, Oliver Wyman Review of IASB impending changes to IFRS 17 standard including - Onerous contracts with proportionate reinsurance - Loan products that provide insurance coverage - CSM amortization for General Model products with investment coverage - Updated acquisition expense requirements Looking at highly debated TRG issues 2:15 p.m. 3:15 p.m. CSM Amortization and Release Looking at Implementation Challenges (Speaker Tentative) Impact of CSM amortization on contracts that include investment services Transitioning to IFRS 17 level of aggregation requirements -allocation of CSM and identification of onerous contracts Pooling of similar risks vs risk sharing assessing the level of aggregation Operational and transition challenges of level of aggregation CSM and level of aggregation Deeper dive into level of aggregation rules -portfolio level -one year issuing period and determination of annual cohort -group level
Issues for participating contracts that do not allocate all returns from underlying items to policyholders CSM allocation to cohorts CSM release under IFRS 17 -General Model terminations as expected, unexpected -Variable Fee Approach terminations as expected, unexpected expected termination for cohorts -interaction of cohorts and coverage units 3:15 p.m. 3:30 p.m. Afternoon Networking Break 3:30 p.m. 5:15 p.m. Working Through the Components of a Life Product with Journal Entries OR Hudson Lopez, Partner, KPMG LLP Trevor Gibbons, Senior Accountant, KPMG LLP Working through life product examples with journal entries including An onerous term product with reinsurance A term product where actual acquisition costs vary from initial expectation A universal life product with a policy loan IFRS 17 for Actuaries Bruce Langstroth, Actuarial Associate Partner, Ernst & Young LLP Fair Value -looking at initial choices Discount Rates -impact on investment strategies -managing the asset side of the balance sheet -drivers to consider on the asset side Risk Adjustment -understanding confidence intervals -relationship of solvency regulatory concepts -adapting Pfads to each organization -quantifying confident intervals 5:15 p.m. End of Day 1 9:00 a.m. 9:05 a.m. Opening Remarks from the Chair Janice Deganis, Partner, Ernst & Young LLP 9:05 a.m. 10:00 a.m Transition Approaches Program June 13 Lesley Thomson, Deputy Chief Actuary, Sun Life Financial Ricky Chawla, IFRS 17 Operational Business Readiness, Sun Life Financial Illustrative examples of transition approaches and adjustments Full retrospective approach availability of detailed historical data existing acquisitions cash flows balance
Modified retrospective approach -understanding the restrictions for utilization -lack of simplifications in full retrospective approach -valuation of past margins Fair value approach - restrictions on nil fair value for assets by IFRS 9 Splitting of portfolios by profitability impact on type of data needed for transition Use of annual cohorts upon transition Transition numbers by annual cohort v. grouped cohorts Specific operational challenges to address for each method Disclosure of how measurement of contracts at transition is determined -reasons for methods used and judgments applied approach 10:00 a.m. 11:00 a.m. Reinsurance Treatment Under IFRS 17 Simon Couture, Senior Manager, PricewaterhouseCoopers LLP Measurement of reinsurance contracts Differences from measurement of insurance contracts Determining CSM of the reinsurance and release of CSM Use of the PAA eligibility Other issues of significance to reinsurers -level of aggregation for reinsurance -required modification to the general model -mismatches in timing of gains and losses -use of different model than underlying contracts Working through examples to illustrate the process Practical responses to reinsurance requirements 11:00 a.m. 11:15 a.m. Morning Networking Break 11:15 a.m. 12:30 p.m. Grey Areas and Key Judgments Insights and Approaches Bobby Thompson, Senior Manager, Ernst & Young LLP Judgments in transition: practical considerations and industry perspectives on applying the three approaches Considering estimates required in the fair value and modified retrospective approaches What is in a contract? Combination, separation, riders and options Determining whether a contract has direct participation features or not and other topics around nondistinct investment components PAA: perspectives for assessing eligibility when term is greater than one year Viewpoints on determining onerousness of contracts under the GMM and PAA the grind of determining granularity 12:30 p.m. 1:30 p.m. Luncheon 1:30 p.m. 2:45 p.m. How IFRS 9 interacts with IFRS 17 Raj Matharu, Senior Manager, Deloitte LLP Natalie Hu, Senior Manager, Manager, Deloitte LLP Overview of IFRS 17 and differences from CALM Introduce time value of money under IFRS 17 Bottom up versus top down Risk free rate + illiquidity premium
IFRS 17 accretion and IFRS 9 classification and measurement Practical issues including how OCI treatment of liability accretion can cause asset issues Practical issues on EIR for IFRS 9 versus curve accretion for IFRS 17 and mismatch that can cause Discuss new income statement and how assets and liabilities emerge into income through subsequent measurement 2:45 p.m. 3:45 p.m. IFRS 17 Systems Solutions and Vendors Trends, Capabilities and Strategies Richard Brayley, Principal, Braylson Group What are we seeing in the market (three case studies) Characteristics of an integrated IFRS 17 finance and risk solution Data discussion: what additional data will be required to support GMM/PAA/VFA calculations; what s the impact on data flows; what are some of the data options / benefits from a technology perspective moving forward Review leading vendors and their coverage of IFRS 17 requirements Target operating model and deployment strategies Implementation approaches and timelines Organizational readiness and how to enable your team Workshop Leader(s): Optional Pre-Conference Workshop IFRS 17 Understanding the Fundamentals Program June 11 9:00 a.m. 5:00 p.m. (There will be 15 minute breaks mid-morning and mid-afternoon) (Lunch will be provided) Kyle Snyder, Senior Manager, PricewaterhouseCoopers LLP The objective of this work shop is to provide an overview of IFRS 17 and an introduction to its key elements with a view to enabling project team members and new project members quickly get up to speed. The workshop will target the essential working parts of the standard and, as well, will relate to standard to established OSFI insurance capital adequacy rules. This session will help your project team have a sound grasp of the basics in order to effectively carry out their roles in the broader project implementation or specific issues the implementation project itself including key issues such as: 1. Background and overview 2. Classification and unbundling 3. Aggregation level (unit of account) 4. Measurement models 5. Transition 6. Presentation and disclosures 7. Employee and other stakeholder considerations
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