The majority of the insurance industry is in the midst of tackling the significant challenges posed by the implementation of material accounting and actuarial system changes required to comply with the new IFRS 17 regulation on how insurance contracts should be accounted for. In recognition of the sheer complexity of this regulatory change the mandatory "go-live" date has been shifted to 1 January 2023, adding an extra twelve months for insurance companies to complete their work.
In this article by James d'Haussonville, Partner, Regional IFRS 17 Leader, Deloitte Asia Pacific, and Byoung O Shin, Head of FSI, Deloitte Korea, they share how Korea's leading life insurer, Samsung Life Insurance has recently completed the implementation of their IFRS 17 solution and are now in the process of producing their first set of full IFRS 17 financial reports.
Samsung Life Insurance are one of the first, if not the first, life insurers to be able to meet the exacting requirements of IFRS 17.
Since 2011, when IFRS was first introduced to the Korean market, Deloitte has supported Samsung Life Insurance as their principal advisor on all IFRS matters and in particular on IFRS 17. In this article, we discuss how Samsung Life Insurance managed to overcome the key challenges they faced to along the way and what insights and learnings can be drawn from the work Deloitte did with Samsung Life in helping them to enable them to achieve this goal.
Early engagement
Samsung Life Insurance participated in the field tests launched by the International Accounting Standards Board (the IASB – the London-based body that produces the IFRS’s adopted by over 100 countries as their accounting regulations), in 2013 and 2016 respectively. These were critical tests for the IASB to set the direction of what eventually became IFRS 17. In spite of the unfavourable circumstances affecting the whole Korean insurance industry due to the lack of any prior experience in fair valuation of insurance contracts, Samsung Life Insurance were able to complete the field test successfully and to become a key reference in the global debate on IFRS 17. Samsung Life used these experiences to inform their approach to build their IFRS 17 solution in a timely manner.
Embracing change
Samsung Life recognised early on that IFRS 17 would fundamentally change the nature of their financial reporting. They took a conscious decision to use this as an opportunity to redesign their financial reporting process from scratch and develop a solution focussed on both IFRS 17 compliance and enhance their risk management and product development processes. The solution is now complete and operational.
It consists of:
- A new insurance liability management system which includes assumption management, cash flow management, and liability movement analyser;
- A SAP based financial closing system which includes financial statements, management accounting and investment accounting (under another IFRS: IFRS 9); and
- An underlying data management solution to enable them to utilize the huge amount of new data in various ways, such as marketing and new product development
Samsung Life Insurance senior management dedicated time to the programme and supported it from the outset through the pro-active oversight of their Chief Accountant who was also their representative at the IASB Transition Resource Group (TRG), Mr JH Park. This was a key success factor given the significant relative size of the overall investment.
Identifying and addressing the key challenges
IFRS 17 solutions come to life when experts from the very different fields of accounting, actuarial, IT, and risk management, work together closely. Achieving the required level of collaboration in Samsung Life Insurance required all parties to develop a level of knowledge and understanding about what each of the others do and how that needs to come together to deliver the required outputs. This was not easy, it required commitment and a realisation that each individual party can only be successful if all parties are successful. Samsung Life Insurance decision to quickly scale up their IFRS 17 work acted as a catalyst to the creation of a cross-functional attitude in the project team that accelerated delivery and mitigated project risks effectively.
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The demand for IFRS 17 experts is far greater than the supply worldwide. It was critical for Samsung Life Insurance to develop a resource strategy that incorporated talent development, education and compensation in order to develop and retain the level of resourcing needed to both develop, deliver and ultimately maintain and run the IFRS 17 solution. By moving early Samsung Life Insurance could source the talent needed when the supply gap was not as large as it is today.
The benefit of a complete solution
Samsung Life Insurance is now in a small group of large life insurers with the benefit of a complete working solution in their hands. This would allow a paced embedding of the new IFRS 17 solution in the fabric of its operating model and present the performance of the business under both the new and the old IFRS bases. With this “parallel run”, management will have time to familiarise with the new metrics, conceive and test new products to improve profitability and sharpen risk management strategies to enhance solvency.
James d'Haussonville, Partner, Regional IFRS 17 Leader, Deloitte Asia Pacific
James d'Haussonville is a partner at Deloitte and leads the firm's IFRS 17 agenda for Asia. Based in Hong Kong he has been involved in IFRS 17 for the last 2.5 years during which time he has led the delivery of the design phase for 2 different multi-entity insurers before taking on his current regional role 8 months ago.
Byoung O Shin, Head of FSI, Deloitte Korea
Byoung O. Shin is the head of FSI (Financial Service Industry) at Deloitte Korea. As a group head of Assurance in Financial Services, he leads consulting services related in the field of insurance and banking including IFRS17. Byoung O. is highly regarded as one of the top consultants in the subject of IFRS17.
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