Assessing how IFRS 17 interpretations can impact decision-making processes

Assessing how IFRS 17 interpretations can impact decision-making processes

By James Orr, Chief Actuary, Head of Department, PRA, Bank of England

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I’m the Chief Actuary for General Insurance (GI) at the PRA. My current professional focus is on the role of the Actuarial Function within regulated GI firms and its effectiveness as a control function. We are speaking to many Chief Actuaries about the challenges they face, which include effective engagement with Boards, delivering against more challenging reporting requirements and, for many, responding to IFRS 17.

What, for you, are the benefits of attending a conference like the IFRS 17 and what can attendees expect to learn from your session?

Given that many of the questions raised by IFRS 17 will be new to many practitioners, the opportunity to learn from others’ experiences, share insights and concerns is clearly valuable. Ultimately, actuarial analysis and financial reporting realise their value in supporting decision-making, and many decisions will need to be made when implementing IFRS 17.  These affect the valuation and presentation of financial information, the data needed to achieve this, the selection of appropriate actuarial techniques, and quite possibly decisions may extend to product design.  So the panel session’s focus on how IFRS 17 will impact decision-making should lead to an interesting and informative discussion, which I hope the audience will engage with.

 What is the current market situation?

I’ve seen that many firms have made a strong commitment to developing their response to IFRS 17, treating it as a major project with formal governance and significant resource commitment. However, I am also hearing that many uncertainties remain as to the approach that should be taken, even on some key points of detail.  In our market, the progress of the EU endorsement process is a major factor and the recent letter from EFRAG to the IASB is indicative that uncertainties remain.

What kind of effects will IFRS 17 have on the market post-implementation?

As a prudential regulator – and IFRS 17 is not a prudential reporting standard – we are particularly interested in the effects the new standard will have on firms’ behaviour, their business strategies and risk profiles. We have no crystal ball and I therefore await these developments with keen interest!

What do you think non life and life insurers should be focusing on?

Understanding the standard, what it means for their business and fostering active engagement from all affected parts of their business – finance and actuarial in particular. To pick one area to focus on, the transition to IFRS 17 and the choice of the methods available looks particularly challenging for both non-life and life insurers and it will effectively fix opening balances and influence future results.

How do you see the impact of IFRS 17 evolving over the next 6-12 months?

I am hoping to see evidence of more dialogue, greater clarity on the key points and progress towards a pragmatic approach within firms that manages the implementation risks and uncertainties presented by a major change programme.

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