By David Castleden, Head of Accounting Policy and Advisory at Old Mutual.
Ahead of the IFRS 17 Forum, David shares with us his insight into IFRS 17 timelines and institutional preparedness in preparation for full implementation.
David, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
I am the Head of Accounting Policy and Advisory for Old Mutual plc, a FTSE 100 company. Old Mutual consists of banking, asset management, life assurance and general insurance. I have been in the accounting technical space for almost the last twenty years with my initial exposure to the banking sector. I was involved in the successful implementation of IFRS 7 at a SEC listed paper company. Prior to the finalization of the new insurance accounting standard (IFRS 17) I have was actively involved in the development of the financial instruments accounting standards. Dealing with multi-jurisdictional regulatory change and the amendments to accounting standards.
What are the essential considerations that need to be made when working alongside Solvency II?
Solvency II may be used as a basis for some of the preliminary calculations required by the new accounting standards. There are quite a few similarities – but the slight differences anticipated could result in material changes to figures presented under Solvency II. This could include the different requirements for the aggregation of contracts, use of discount rates. It is important to note that Solvency II did not specifically address the approach to transition – as it was largely a capital standard as opposed to a full statement of financial position.
What are some of the anticipated challenges of moving from proof of concept to modeling business and performing calculations?
Discovering what data is there for the entire population – including acquired books.
The need to run multiple calculations in order to determine the approach to transition
Ensuring that all projects (not only IFRS 17) are taken into account when decisions are made. Flexibility on transition – the standard allows for multiple approaches to transition and deciding which approach is most appropriate requires multiple runs of the same system.
At the IFRS 17 Forum, you will be speaking on your insight regarding – IFRS 17 timelines and institutional preparedness. Why do you believe this is a key talking point in the industry right now and what can risk professionals gain from this insight?
Solvency II is largely embedded by most insurers. The key discussion points by insurers at the moment is the size of the project required; how this will linked with other projects, the sourcing of the necessary skills; the suitability of the current IT systems, education of all stakeholders, the tax impacts of elections made.
Can you give a brief overview of the levels of preparedness in large and smaller insurers?
Large insurers – have typically been monitoring the project for a long period of time. The Board and Audit Committee’s are well aware of the requirements of the standard. In the lead up to the issue of the standard a lot of project preparation was done. The large insurers have been extremely active in sourcing strategic partners and hiring the appropriate skills. Smaller insurers are in the commencement of the project stage. One of the key challenges is the securing of high quality resources – both people and IT systems.
What, in your opinion does the future hold for IFRS 17 risk professionals, and how can they ensure they are prepared for full implementation?
Educatiion – being able to explain the broader implications of the standards
Understanding the standard – so as to challenge current product design – which may result in better products being written.