IFRS 17 interpretations and how they can impact decision-making processes

IFRS 17 interpretations and how they can impact decision-making processes

By Asif John, Managing Director, AMJ Global Solutions

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

AMJ consultancy formed in 2017 providing analytical solutions for clients across the globe. I’ve obtained over 15 years’ experience within the Non-Life P&C primarily within the actuarial and Artificial Intelligence /Data Science space (more recent years data science with application to machine learning). My current focus is more with innovation and to apply the advance techniques within our industry with a pragmatic approach, which has been mainly applied in pricing, reserving and business planning. For example; Applying to the traditional reserving more granular approach using machine learning techniques within the actual vs expected value and grouping the peril types for claims and exposures.

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

The key benefit for me is to address the importance of being pro-active rather than re-active in our market. My focus will be discussing why granular data is key importance value under the principle IRFS17. For example; The innovative reserving come to augment the reserving capabilities on top of the existing traditional methods, pressure cooker creating mist of steam. This result of our landscape being currently revolutionising with utilising artificial intelligence functions and its application. We are here to embrace this CHANGE by applying different approaches/methodologies to reengineer our pressure cooker nobs reducing the steams. Hence how can we optimise using granular data within reserving.

What is the current market position and how can IFRS 17 impact decision making once implemented?

Companies are starting to implement the IFRS 17 principles though still premature to know how this will impact decision making, it’s a tough challenge in understanding the operational impacts on data, its systems and processes. However, new data, system and process challenges and will impact the decision making and hence its equally important to create governance around the implication for this to be managed very carefully.  This is also the fact we need to be mindful of Data Management Strategy, the systems architecture design and within each operation (i.e. actuarial and finance) have different processes.

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

The focus for both life and non-life insurers should be on making the assumptions align closely with the actual risk undertaken, which will understandably vary by each underwriting year. Additionally, this risk should be reflected not only in the IBNR but across all the different provisions in the balance sheet. Moreover, the actual risk undertaken should be informed not only by the risk factors in that underwriting year (for e.g. nature of business written), but also by evolving risk factors across calendar years (for e.g. socio-economic and legal environment). In doing so, it is most important to predict risk assumptions at the granular level (for e.g. by region, by industry, by type of claim, etc.), so as to account for this.

How can actuarial and accounting teams coordinate?

Actuaries and accountants both work with the same information, both handle financial data, and both generate statistics. Yet each will perform different business functions and will serve different purposes. The majority of actuaries are employed in the insurance industry, and deal primarily with risk. They will provide the statistical probability of a future event occurring (such as accidents or natural disasters) and advise managers on how to reduce any likely financial impact of adverse events. They also advise insurance companies how much to charge in premiums and which customers to insure. Accountants work with individuals or organizations, handling monetary transactions by recording financial information. Their job may also include financial analysing and reporting, preparing tax returns, auditing accounts, and/or acting as consultants on a wide variety of financial matters. Their duties are typically broader than that of an actuary. How we coordinate will depend on the team structure design and how we create better synergies allowing us to coordinate more effectively.

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

IFRS 17 will lead to some movements in the market for insurers that write longer tailed lines of businesses as the risk of the contracts will be tested upfront, thus reducing the risk of major adverse developments long after the business has been written. There will be a major demand for analytics and reporting as companies will look to measure risks at more granular levels, and hence more accurately. This will enhance the use of predictive modelling / machine learning in reserving.

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