Exploring challenges associated with re-insurance best practice for successful contract management

Exploring challenges associated with re-insurance best practice for successful contract management

By Alexandre Tzenev, Head of Structuring EMEA, SCOR Global Life

Alexandre, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
  • I am a reinsurance professional specialising on the capital management of life insurers in EMEA.
  • Our team provides tailor-made reinsurance solutions to optimize the capital position or mitigate volatility of earnings of insurers.
What, for you, are the benefits of attending a conference like the IFRS 17 and what can attendees expect to learn from your session?
  • IFRS 17 introduces some challenges on how profits recognition may materialize in risk transfer arrangements between an insurer and a reinsurer.
  • My goal is to shed some light on the key differences insurers should be made aware when considering reinsurance contracts as part of their P&L management.
 What are potential challenges of mismatched contracts associated with re-insurance?
  • Mismatched contracts may create unintended volatility in profits/losses recognition of insurers.
  • The matching of boundaries between contracts becomes a key element in the design of a solution that can properly mitigate an undesirable profile of profits recognition for a group of insurance contracts.
In your opinion, how important is it to compare best practices for reinsurance profit reporting?
  • As IFRS 17 follows a principle-based valuation approach, the importance of adhering to best practices standards becomes essential to ensure that harmonization of profits recognition is achieved among like-for-like insurers.
  • Insurers will have to be able to demonstrate the soundness of their valuation approach based on well-established economic principles which goes hand in hand  for insurance and reinsurance contracts.
How can risk professionals best identify risk trends without re-insurance causing complications?
  • UK life insurers have historically relied heavily on reinsurers to manage their underwriting risks while focusing resources on product management and commercialization of products.
  • IFRS 17 somewhat brings risk and capital management at the cornerstone of product development efforts to ensure that long-term profitability is achieved.
  • The concept of “netting” losses with reinsurance arrangements will no longer apply such that risk professionals at primary carriers will need to identify risk trends irrespective of whether reinsurance is put in place.
How do you see the impact of IFRS 17 evolving over the next 6-12 months?
  • The next 6-12 months will most likely be spent on implementation efforts and development of appropriate valuation models rather than optimization efforts.
  • Best practices in the valuation of reinsurance contracts under IFRS 17 are still at an early stage and guidance is expected in the formulation of contract boundaries and requirements for adequate risk transfer arrangements.

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