IFRS 17 and the risk agenda video series

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IFRS 17 should make insurers more comparable to other financial services entities like banks and asset managers. How will insurers fare in comparison? Will they look smaller than before? Less attractive from a profit to revenue or a profit from risk-taking perspective?  

IFRS 17 has major risk implications, particularly in the areas of:

  1. Measurement models
  2. Geographic application
  3. Strategic risk

We discuss these and other topics in our video series.

From the perspective of the risk agenda, insurers should take the following actions:

  • Add ERM and economic capital experts to the transition team. It would be wasteful to “reinvent the wheel” when much work has already been done on best-estimates, discount rates and risk charges. Additionally, letting IFRS diverge from economic capital, without a clear explanation of why and how much, will be problematic when explaining reported results.
  • Under IFRS 17, the profit components of insurers’ businesses and the amount of risk taken and risk-capital committed will be clear. It will be better to 1) know as soon as possible how businesses will look under this new spotlight, and 2) address potential problems before now rather than later.
  • Risk departments should incorporate the transition to IFRS 17 into their own planning. For example, an integrated reporting model that supplies both accounting and risk reporting purposes should deliver information faster and more economically. Accordingly, risk departments should consider how to effectively utilize this more timely information and newly available resources in order to better manage risk.
     

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Henry Essert

Insurance Risk & Capital Services Leader, PwC US

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