By Otto Bauer, Former FAR Controller, Zurich.
Otto, can you tell the Risk Insights audience a bit about yourself, your experience in the industry and what your current professional focus is?
I am a Canadian CPA CA, having started as an auditor with the (now-called) big 4, but have now worked in (re)insurance for over 20 years and mainly in Europe.
My main insurance experience with insurance has involved the implementation of accounting and reporting standards. I have followed the development of IFRS 17 off and on since the inception of the insurance project in 1997, and have led the implementation of IFRS 4 for a global insurance group.
You will be speaking at the upcoming IFRS 17 Forum on the topic: Exploring resourcing strategies and the ability to effectively manage timeframes, budgets and staffing. Why is this a key talking point in the industry right now?
Ideally, companies will have made some preparations for the implementation already. Being things that are, this is not the only priority, so it is now starting to gain broader momentum. This will result in more competition for resources, and with emphasis in general on efficiency and effectiveness to get things done, this makes resourcing a key item. Add to this that the standard, as expected, goes right to the core of the business, and you quickly see that IFRS 17 needs to be carefully considered and planned – both for the “must’s” as well as for the potential added benefits.
Without giving too much away, what key considerations need to be made when leveraging resources from other areas into IFRS 17?
We can talk and will talk about a number of aspects, but one clearly needs to first understand what will change as a result of the standard, and what the organization wants to change. This will define the scope of the implementation, i.e. what areas are impacted, whether it be IT, underwriting, etc. Second, the organization will have its view as to how such projects are to be carried out – these are real decisions on cost, future headcount and knowledge management.
Can you briefly explain the difference in roles of an actuary and an accountant? How can institutions bridge this gap?
Not an easy question. The roles themselves are evolving. Simply stated, in the past an actuary would just “model” and produce the insurance technical numbers, and the accountant would take them and simply record and report as best as he could.
Now, we see that accountants are being challenged ever more to fully understand and comment on what is being recorded, and with greater detail, particularly with IFRS 17. Furthermore, the actuaries are being challenged to enter into a dialogue with the accountants and explain the modelling/reserving and their outcomes. I believe we are seeing an evolution of distinct roles into a more seamless process and dialogue where the participants understand what happens at all stages.
That said, the actuary nevertheless continues with his mandated statutory responsibilities, whereas the accountant’s role includes areas beyond just the reporting of insurance technical information.
You will also be speaking on a panel discussion later in the day to discuss managing transition and effectively communicating changes in profits to internal members and external stakeholders and investors. What do you think will be the key talking points amongst panelists and why?
A key broad issue, if perhaps only the elephant in the room, is the tremendous effort that is required for the challenge to not only change how we measure and report our business, but also to intelligently communicate the results of what is a complex process and product. This forms the backdrop for the learning effort which goes up and down the entire organization.
From this perspective, important decisions are being or will be made on the effort and goals for the transition, how we want to measure and reward outcomes internally, communicate with investors, etc. And the list goes on and on.
How do you see the risk and regulations industry evolving over the next 6-12 months, particularly around IFRS 17?
I expect that not too much will be visible for such a short time frame, but let’s stretch that to the point of implementation.
On the regulations side, the impact depends on whether IFRS links in to the statutory reporting basis, and how strong the solvency regime is. Where there is a statutory link, regulators have clearly developed an interest in the outcomes, and may want to know how impacted companies are ramping up.
On the risk side, and partly tying back to the regulations aspect, there is first of all the question of internal controls that will need to be adapted to the revised/new processes. In another vein, there is the potential that IFRS 17 provides new insights into the risks of a particular business, leading to efforts to address same.