The impact of IFRS 17 on new business streams

The impact of IFRS 17 on new business streams

By Mark Laidlaw, Life Finance and Group Actuarial Services Director, LV.

Mark will also be speaking at the IFRS 17 Summit on his insight regarding Future Impacts of IFRS 17.

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

I am currently the Chief Investment and Capital Officer at LV focused on all aspects of capital management and managing our outsourced asset manager. This role (which is new to LV) brings the asset and liability management together for the first time under one head. Previous to this role I ran the Actuarial function at LV covering financial reporting and actuarial reporting. Before I joined LV, I was at AEGON for 24 years doing a number of roles including Chief Risk Officer of the UK business , Chief Financial Officer of the UK and latterly running the Global Solvency II project out of Group Headquarters in The Hague.

In your opinion, do you believe IFRS 17 will encourage risky behavior based on the impact on IFRS 17 numbers?

For UK/European insurers I think the focus is very much on SII capital position and also cash generation, so I don’t see that introducing IFRS 17 will change the focus or encourage changes to products or balance sheet management going forwards.

In your opinion, what is the best practice for handling increased market & profit volatility?

Good risk management is about focusing on what drives the underlying returns to shareholders, which is all about dividends, which is driven by capital and I think that efficient hedging programmes focused on capital stability will be key.

At the IFRS 17 Forum, you will be speaking on your insight regarding – potential unintended consequences of IFRS 17 and impact on new business streams. Why do you believe this is a key talking point in the industry right now and what can risk professionals gain from this insight?

I think that the main issue is that IFRS is not a global standard and that we will still have differences with US in particular. I think this could lead to an arbitrage situation with companies headquartered in different jurisdictions targeting different earning streams; inevitably leading to an uneven playing field.

In your experience, how does IFRS 17 impact decision making?

Too early to say on business fronts but in terms of long term, planning and making strategic decisions around investment capital and things like actuarial systems it is starting to be talked about and making sure we are future proofing any changes/revisions to processes and systems

What, in your opinion does the future hold for IFRS 17 professionals, and how can they ensure they are prepared for full implementation?

There will be a lot of work to do. The main thing to do is to work out what the implementation plan looks like and to develop as much as possible as early as possible. We should try learn from the SII experience and avoid the mistakes made and get as much engagement as possible with senior management and NEDs.