This industry-wide report investigated the challenges life insurance companies are facing around the IFRS 17 risk adjustment and its associated confidence level.
Based on the conversations we’ve been having with our clients, it seems discussions are still ongoing in gaining agreement within their organisations on the best approach to adopt to deliver the IASB’s goal of ensuring industry consistency and comparability for measuring and disclosing risk.
One area which is yet to be resolved in the minds of many IFRS 17 practitioners is the question of whether the confidence level should be applied over a single year or over the lifetime of insurance contracts. In our survey, there was a division of opinion about the preferred approach between South Africa and the UK and Europe with the former clearly favouring the pragmatic one-year approach and the latter equally divided.
Insurers are facing pressure from some corners to adopt an ultimate run-off approach when specifying the risk adjustment confidence level. This ignores the fact that many who do not currently have the capabilities to implement this methodology will view it as unnecessary and impractical. Implementing the more onerous approach would consume valuable resources that could be better spent elsewhere.
An opportunity for insurers to strengthen their position is to adopt a more collaborative approach amongst themselves. Currently, insurers are taking learnings about IFRS 17 in open industry forums such as events, online discussions, and trade press, but there is resistance from individual companies with respect to sharing experiences, the challenges faced and ideas on the best way to drive their industry forward.
We are now inviting insurers to take part in our follow-up survey that will further explore current thinking and the challenges facing insurers around IFRS 17, specifically focusing on the risk adjustment and confidence level.
If you would like to be included in this global research, please get in touch. For all companies that participate, we will be providing a personalised analysis of their risk adjustment scenario and relative position within the market.
