Some Design Considerations Sai Srinivas Dhulipala

Transcript:Some Design Considerations Sai Srinivas Dhulipala:
Some Design Considerations Sai Srinivas Dhulipala Consulting Actuary 5th Webinar on IFRS17 16th November 2021 Introduction www.actuariesindia.org IFRS 17 Implementation work flow Designing Execution Testing Roll-out Plan & Assessment 20% 30% 30% 10% 10% Introduction Implementation of IFRS 17 brings significant changes to entity’s systems, processes and data management It may impact business operations and financial systems of the entities unless it is carefully planned in structured way in designing phase itself A lack of understanding and coherent approach in design stage may further derail the implementation plan and may consume more money, time and resources www.actuariesindia.org Level of Aggregation Group of Contracts – basic unit of account for CSM accounting Portfolio Cohort Profitability Measurement model www.actuariesindia.org Group of Contracts Portfolio Cohort Profitability Measurement model www.actuariesindia.org Portfolio Portfolio component of entity at which the statement of financial position is expected to be provided Interpretation of “similar Risks” and “managed together” Contracts in different product lines would not be expected to have similar risks LOBs are natural portfolios Decision on “managed together” www.actuariesindia.org Portfolio Portfolio Guidance by IFRS 8 – Whose operating results are reviewed to make decisions about the resources to allocate and assess its performance May need further factors to assess performances – Distribution channel or major partner, or a product line www.actuariesindia.org Group of Contracts Portfolio Cohort Profitability Measurement model www.actuariesindia.org Cohort Annual vs Quarterly Quarterly performance can be tracked (group biz) Need to weigh this against too many groups and the associated complexity www.actuariesindia.org Group of Contracts Portfolio Cohort Profitability Measurement model www.actuariesindia.org Profitability Testing of Onerousness Where do you test the onerousness? Actuarial software IFRS17 solution system ETL Other means What other means are possible? www.actuariesindia.org Profitability Prior tagging of profitability is required Cash flows and Risk adjustment tagged at GOC is used for CSM Unless tagged, separate GOC can’t be created for onerous contracts Can be based on ‘reasonable and supportable information’ A few choices can be followed VNB / VNB at risk CSM at risk for range of policies covering portfolio Create a rule engine to decide the tagging for every contract www.actuariesindia.org Group of Contracts Portfolio Cohort Profitability Measurement model www.actuariesindia.org Measurement Model Default model is GMM VFA eligibility testing Testing required to be done at contract level. But may accept one assessment for homogeneous contracts in same market conditions and priced on same basis First condition is to be fulfilled at fund