1SRixmyEWip8Mcpo1XEe UK61PZeuXosr

IFRS 17
Implementation Issues in Life Insurance - General Overview

PT Asuransi Jiwa Taspen (Taspen Life)
Presented by: Dr. Ludovicus Sensi W, CPA, CA dan Teams
Agenda
1 Video IFRS 17
2 General overview of IFRS 17

2.1 Why has IFRS 17 been developed?
2.2 Timeline
2.3 Implication to Management and Stakeholders
2.4 Business Implications
2.5 Changes in FS Presentation and Disclosure
2.5 Key focus areas of the standard
3 Understanding Insurance Business and Its Product
3.1 Insurance Value Chain
3.2 Understanding Insurance Business and Its Product

2
Agenda
4 Actuarial Aspect
4.1 Measurement model
4.2 Separated components
4.3 Level of aggregation
5 More Understanding Measurement Models
5.1 Building block approach
5.2 Premium allocation approach
5.3 Variable fee approach
3
Agenda
6 Understanding Onerous Contract
7 Reinsurance ceded aspects
BREAK
8 Impact of IFRS 17 for IT
9 Transition
10 Issues from a life insurance and Taxation
11 Operational implications
12 Approach and Methodology
13 Focus Group Discussion
4
Today’s presenters
Ludovicus Sensi W Antonius Djohan N, CISA
IFRS17 - ACCOUNTING LEADER TECHNOLOGY INFORMATION
Albert Serhalawan
Diah Fitri Setiasih Mourits Rompah
BUSINESS PROCESS AND TAXATION
ACTUARIAL ACTUARIAL
5
1 Video IFRS 17
6
7
2 Overview of IFRS 17
8
OVERVIEW OF IFRS 17 – FIRST TRULY IFRS
STANDARD
IFRS 17: the first truly

international IFRS
Standard for insurance
contracts
IAI IFRS International Seminar
Jakarta, 12 July 2017
Sue Lloyd
IASB Vice-Chair
The views expressed in this presentation are those of the presenter,

not necessarily those of the International Accounting Standards Board (Board) or
IFRS Foundation.
Copyright © IFRS Foundation. All rights reserved
9
OVERVIEW OF IFRS 17 – FIRST TRULY IFRS
STANDARD
IFRS 17 Insurance Contracts
• IFRS 17 issued onIFRS

18 May17: the
2017 first truly
🗐 international
replaces an interim Standard - IFRS 4 IFRS
🗐
requires consistent accounting for all insurance contracts,
based on a current measurement modelcontracts
🗐 will provide useful information IAI
about profitability
IFRS International of
Seminar
insurance contracts
Sue Lloyd
IASB Vice-Chair
Effective on 2021
🗐 early application permitted
🗐 one year comparative information
10
OVERVIEW OF IFRS 17

international IFRS
Why has IFRS 17 been
contracts
developed?
Sue Lloyd
IASB Vice-Chair
Copyright © IFRS Foundation. All rights reserved
11
OVERVIEW OF IFRS 17
IFRS 4: Lack of Comparability

Top-20 listed insurance companies using IFRS Standards
Accounting policies applied to IFRS
Number of17: theTotal first
assetstruly
insurance contracts issued companies (US$ trillions)
Based on guidance in:
international IFRS
Standard8 for insurance 4.1
• a mix of national GAAP*
Why has IFRS
3
17 been1.6
• US GAAP contracts
4 developed? 1.4
• Canadian GAAP
5 Jakarta,2.0
12 July 2017
• other national GAAP
Total 20 9.1 Sue Lloyd
IASB Vice-Chair
* These companies had subsidiaries in different jurisdictions. They accounted for the
insurance contracts they issued in different jurisdictions using accounting policies
based on requirements of national GAAP for each jurisdiction.
Source: Effects Analysis on IFRS 17
12
OVERVIEW OF IFRS 17
Discount rates used today by IFRS insurers
22%
43%
35%
Current rates Historical rates Mix of rates
Discount rates used for a sample of life insurers (2015)

13
OVERVIEW OF IFRS 17
Same company, different pictures
IFRSYear 17:
1 the first truly
(in millions of
currency units) GAAP 1 GAAP 2 international
DifferenceIFRS
Revenue Why has
8,263 IFRS 17
10,979 been (33%)
(2,716)
contracts
Operating income 1,416 633
developed?783
IAI IFRS 55%
International Seminar
Net income 965 337 628 Sue Lloyd

65%
IASB Vice-Chair
Total equity 8,977 3,872 5,105 57%
14
OVERVIEW OF IFRS 17
To improve financial information
IFRS 4 – Lack of transparency or useful IFRS 17 – More transparent and useful

information information
Lack of useful information about insurance
IFRS
•
17:
Current
the
assumptions
first truly
regularly updated
obligations
• Use of old or outdated assumptions GAAP 2 international
• Options and guarantees fully
• Estimated future Difference IFRS reflected
payments to settle
• Options and guarantees not fully reflected in Standard for insurance
incurred claims reported on a discounted
measurement of insurance contracts Why has basis IFRS 17 been
• Time value of money not considered when • Discount rate reflectcontracts
characteristics of the
measuring liabilities for incurred claims developed?
insurance liability
IAI - risks not
IFRS International matched by
Seminar
• Use of expected return on assets held as assets will be reflected
Jakarta,in12
the
Julyaccounts
2017
discount rate • Unearned profit recognized as the
Sue Lloyd
Lack of transparency about profitability insurance coverage is provided
• Revenue recognized on a cash basis • Additional metrics to IASB Vice-Chair
evaluate performance
• Use of many non – GAAP measures will be available
15
OVERVIEW OF IFRS 17
16
OVERVIEW OF IFRS 17 - TIMELINE
IASB Implementation Support
Educational materials:
► Webcasts / webinars
IFRS 17: the first truly Mostly monitor
Light touch on implementation
GAAP 2 international
DifferenceIFRS
► Presentations TRG (and IFRIC / Board)
/ educational activities
► Articles discussions
2017 2018 2019 2020 contracts
2021 2022/2023
developed?
Implementation period Reporting
Sue Lloyd
18 May - IFRS 17 June – Exposure Draft IFRS 17 start of comparative IFRS 17 effective date
IASB Vice-Chair
Final standard on proposed changes period (proposed*)
to IFRS 17 1 Jan 2023
(*) IFRS 17 has been issued with an effective date of 1 Jan 2023.
DSAK has been released IFRS 17 (PSAK 74) with an effective date of 1 Jan 2025.
17
OVERVIEW OF IFRS 17
18
OVERVIEW OF IFRS 17 - IMPLICATION TO MANAGEMENT AND STAKEHOLDERS
Accountin
g
international IFRS
IT System
Actuarial for& insurance
Processes
IFRS 17
contracts
Sue Lloyd
IASB Vice-Chair
Human
KPIs
Resources
19
OVERVIEW OF IFRS 17 - BUSINESS IMPLICATIONS
■ Changes in KPI – Adjustments to the Performance Management
performance
and KPI Framework are required – the calibration of
measures needs review. Both insurers and
GAAP 2 international IFRS
investors need to understand financial impact and how to
Difference
explain results to investors community
■ Why
Profit has IFRS
emergence 17products
for the key beensold by Insurers will
change significantly under IFRS 17 contracts
developed?
■ Product Design – Additional considerations
Jakarta,for product
12 July 2017 features,
distribution channels, matching of assets and liabilities needed.
Sue Lloyd
IFRS 17 may drive new requirements and rules for ALM and GRC
IASB Vice-Chair
20
IFRS 17 IS IMPACTING ASIAN INSURERS AND THEIR STAKEHOLDERS IN MULTIPLE
WAYS
Investors perspective: Revenue & Profit

Profile, Capital, Dividend
Business perspective: Financial

performance (actuals & planned), KPIs and
Products IFRS
Preparers perspective: Group and 17
Local statutory, Regulatory & Tax
reporting
Operational perspective: Finance, Risk,

IT…
21
SEVERAL KEY CONSTITUENCIES WILL NEED TO WORK MORE CLOSELY TOGETHER…
Accounting policies / financial statements
New COA, mapping

Shared
table, automated
disclosures
Finance controls RPA, etc
IFRS 17
Risk I
T System
New models and
enhancement &
controls
interfaces
Actuarial system
upgrades
22
SUMMARY OF THE KEY IFRS 17 IMPLEMENTATION CHALLENGES
Need to decide multiple accounting choices

Major revamp of financial statements needed
Accounting
Much of the current reporting will be
& Reporting
impacted
Determine desired level of aggregation Data: availability & granularity

Need to understand impact on products Products & Operations Historic data needed for in-force
Model changes to cater for new CSM Business & Systems business to derive transition
adjustment for opening
Definition of new KPI & management
balances
scorecards changes
Multiple system choices
Finance, actuary, technology, operations: Getting Project &

all the required people involved and engaged at Change
the right time is key to a successful IFRS 17 Managers
project delivery
23
PROJECT & CHANGE MANAGEMENT
What are the key accounting &

Operations What are the main product and
business operations
disclosure differences?
implications?
Project
Finance Actuary
&
Change
Manager What are the required model
What are the required data and
changes and financial/product
system changes? s
Technology implications?
24
REPORTING IMPACT
Regulatory IFRS 17
Tax Reporting
Reporting Reporting
• All Asian countries are • Almost all countries in • Each Asian country has
developing their own Asia plan to converge its own tax framework,
regulatory framework towards IFRS 17, albeit often based on the local
(RBC, RBC 2, ICAAP – with a different statutory reporting with
Internal Capital timeframe, and possibly certain adjustments
Adequacy Assessment different local guidelines
Process)
?Will there be convergence ? ?

What about EV –
under ICS – Risk based How will tax authorities
embedded value & VNB –
Insurance Capital adjust to IFRS 17?
value of new business?
Standards?
25
OVERVIEW OF IFRS 17 - CHANGES IN FS PRESENTATION AND DISCLOSURE
Statement of Comprehensive Income

Insurance revenue
Insurance services expense
Net earned premiums
Interest, dividend and other investment income
IFRS 4 Incurred claims and expense
IFRS 17
DifferenceIFRS
Incurred claims and benefits Acquisition costs
Standard
IFRS 17 for insurance Gain/loss from reinsurance
Change in provisions
Why has IFRS 17 been Insurance service result
Profit or loss contracts
Investment income
developed? Insurance finance expense
Key Changes : Net financial result
▪ Two drivers of profit presented separately Sue Lloyd
Profit or loss
IASB Vice-Chair
▪ Insurance revenue excludes deposits [written premiums disclosed in the notes]
Discount rate changes on insurance
▪ Revenue and expense are recognized as earned or incurred
liability (optional)
▪ Insurance finance expenses are excluded from insurance service result and are
presented (i) fully in P&L or (ii) in P&L and OCI, depending on accounting policy Total comprehensive income
26
OVERVIEW OF IFRS 17 - CHANGES IN FS PRESENTATION AND DISCLOSURE (CONT’D)
Statement of Financial Position
Assets IFRS 17: the first truly

Insurance contract assets IFRS 4
Deferred acquisition costs GAAP 2 international
DifferenceIFRS
Assets
Insurance contract assets
Premiums receivable
WhyIFRShas IFRS 17 been
Reinsurance contract assets
Policy loans 17 contracts
developed?
Liabilities
Insurance contracts liabilities
Liabilities Jakarta, 12 July 2017
Insurance contracts liabilities Reinsurance contracts liabilities
Sue Lloyd
Unearned premiums IASB Vice-Chair
Claims payable
27
OVERVIEW OF IFRS 17 - IMPROVE FINANCIAL REPORTING
Provides up-to-date market consistent Underwriting revenue and expenses are

information of obligation including recognised over time in comparable way
value of options and guarantees to other non insurance business

Single DifferenceIFRS
Standard for
accounting insurance
Reflects time value of money
Why has IFRS 17
approach been
Provides separate information about the
investment and underwriting performance
contracts
developed?
Sue Lloyd
IASB Vice-Chair
Assumptions used in the valuation of insurance contact
liabilities reflect the characteristics of the insurance
contract rather than the risk related to asset / investment
activity
28
OVERVIEW OF IFRS 17 - KEY FOCUS AREAS OF THE STANDARD
Risk-Based Capital (RBC)
Building block approach /

Contractual service margin
variable fee approach

Risk adjustment
DifferenceIFRS
Presentation
Discount rate /
Definition and scope
Insurance Contract Standard for insurance Disaggregation

Expected value of future
cash flows
contracts
Reinsurance Disclosure
Separation
Premium allocation developed?
Risk
adjustment
Component approach
Liability for
remaining Transition
Discount rate Sue Lloyd
coverage
IASB Vice-Chair
Cash flows of
claim
liability
Financial instruments and other accounting changes
29
OVERVIEW OF GENERAL MODEL
Release of contractual
Contractual IFRS 17: the first truly

service margin
service margin
Change in estimates
DifferenceIFRS
Interest accretion at
inception rate
Profit or loss (insurance
+ Standard for insurance service result)

contracts
Experience
developed?
Fulfilment cash flows
Risk adjustment adjustments

+ Release of risk
Probability weighted
discounted expected
adjustment Sue Lloyd
present value of cash IASB Vice-Chair
flows
Time value of money Profit or loss and/or other
and other assumptions comprehensive income
related to financial (insurance finance income
risk or expenses)
Insurance Contract Liability
30
INSURANCE RISK VERSUS NON-INSURANCE RISK
Case Study
Risk-Based
Insurance risk, as defined – ‘Risk, other than financial risk, transferred from Capital
the holder(RBC)
of a
Identify which one is the insurance risk and
contract to the issuer.’ [IFRS 17, A]
which
Take only the definition above into account you do not have to consider whether other one is the financial risk from the case below:
requirements, such as uncertainty or timing are also met.
Examples of insurance risk (note that this is not an exhaustive list):
Life insurance contract with guaranteed minimum
return on account value and death benefit as
maximum (Sum Assured or Account Value).
DifferenceIFRS
Insurance Risk Financial Risk
contracts Note that this contract is
Death or survival Interest rates developed?
an insurance contract
since there could be one
Injury Financial instrument prices scenario where the death
benefit will significantly
Illness Currency exchange rates exceed the policyholder’s
Sue Lloyd
account balance
Disability Indices of prices or rates IASB Vice-Chair
Loss of property due to damage/theft Credit ratings/credit indices
Failure of a debtor to make a Commodity prices

payment when it is due
31
3 Understanding Insurance Business and Its Product
32
3.1 Insurance Value Chain
33
INSURANCE VALUE CHAIN – PRODUCT SPECIFICATION
Global Insurance Industry Insight - McKinsey

Company's Margin, 5%
Cost of Admin, 31%

(Perlu adanya
efiesiensi)
Reserve & Claims, 60%

(Perlu analisis underwriting
Investment Profit 4% risk yang lebih memadai)
34
INSURANCE VALUE CHAIN – COST OF INSURANCE
Global Insurance Industry Insight - McKinsey
35
3.2 Understanding Insurance Business and Its Product
36
UNDERSTANDING PROCESS BUSINESS
Taspen Life
37
UNDERSTANDING PROCESS BUSINESS
Regulating and Controlling Scheme

Insurance Company
Going Concern
Regulation
Public Fund
and
Controlling
Company’ Solvency Margin

s Health
indicators
Own Retention
Others
Indicators Reinsurance
Technical
Reserves
Investment
38
MEMAHAMI PRODUK ASURANSI TASPEN LIFE
❑ Traditional Product:
IFRS® Foundation ▪ Endowment (Saving)
▪ Term Life - Protection
▪ Healthcare
▪ Personal Accident
▪ Whole Life
▪ Credit Life
❑ Non Traditional Product
▪ Unit link
▪ Universal life of contract
▪ Investment type of contract
❑ Period Cover
▪ Short-term contract
▪ Long-term contract
❑ Some IFRS 17 Concern :

▪ Significant insurance Risk
▪ Separated component (IFRS 17,15, dan 9)
▪ Contract Boundary
▪ Reinsurance contract held
▪ Measurement model (GMM, VFA, PAA)
▪ Combination and unbundling contract
❑ Need product screening
39
MEMAHAMI PRODUK ASURANSI TASPEN LIFE DAN IFRS 17 REQUIREMENT
IFRS▪® Foundation
Produk Asuransi Kesehatan yang memberikan perlindungan Rawat Inap, ICU, Pembedahan hingga Meninggal
Dunia.
▪ Area of concern:
• Period cover (short term – PAA or GMM)
• Business model (ASO atau Insurance risk assume
• Contract combination (BPJS Kesehatan)
▪ Produk yang memberikan perlindungan jiwa selama 10 tahun dengan masa pembayaran premi selama 8 tahun
dan pengembalian premi 100% di akhir masa asuransi.
• Period cover (long term – GMM or M-GMM)
• Acquisition cost (DAC)
• LRC dan LIC
• Discount Rate
• Actuarial assumption vs IFRS Requirement
▪ Produk yang dirancang tidak hanya memberikan manfaat proteksi jiwa namun juga memberikan saving
solution bagi rencana keuangan masa depan Anda.
• LRC dan LIC
• Discount Rate
• Separated component - Disaggregation is the exclusion of an unseparated investment
component from insurance contracts revenue – Pengakuan CSM hanya untuk insurance risk
40
IFRS▪ ® Foundation
Program asuransi yang kami tawarkan untuk mempersiapkan dana pendidikan putra-putri Anda sekaligus
memberikan perlindungan jiwa bagi orang-orang yang Anda sayangi.
• LRC dan LIC
• Discount Rate
▪ Program asuransi yang kami rancang untuk memberikan perlindungan jiwa dan mempersiapkan kebutuhan Anda
menjelang usia pensiun dengan pilihan masa asuransi 5 tahun dan 10 tahun.
• LRC dan LIC
• Discount Rate
▪ Program yang dirancang khusus untuk memberikan proteksi jiwa karyawan Perusahaan Anda dalam jangka waktu
tertentu.
• Combination and Unbundling contract
• LRC dan LIC
• Discount Rate
41
IFRS▪▪® Foundation
Program yang dirancang khusus untuk memberikan proteksi jiwa karyawan Perusahaan Anda dalam jangka waktu tertentu.
Area of concern:
• Combinatioan and unbundling contract
• LRC dan LIC
• Discount Rate
▪ Program asuransi yang kami rancang untuk memberikan proteksi jiwa dan perencanaan hari tua karyawan dengan penerimaan
manfaat asuransi peserta dilakukan secara bulanan.
• LRC dan LIC
• Discount Rate
component from insurance contracts revenue – Pengakuan CSM hanya untuk insurance risk
▪ Program asuransi yang kami tawarkan untuk memberikan perlindungan jiwa dan tabungan hari tua karyawan yang dirancang
sedemikian rupa dengan manfaat asuransi dapat ditetapkan terlebih dahulu sesuai dengan keinginan Perusahaan.
• LRC dan LIC
• Discount Rate
component from insurance contracts revenue – Pengakuan CSM hanya untuk insurance risk (Investment portion and Insurance
portion)
42
▪ Program yang dirancang untuk memberikan perlindungan jiwa seumur hidup bagi karyawan Perusahaan Anda.
IFRS▪® Foundation
Area of concern:
• LRC dan LIC
• Discount Rate
▪ Program asuransi yang kami rancang untuk memberikan perlindungan jiwa dan perencanaan hari tua karyawan
dengan premi yang dapat disesuaikan berdasarkan keinginan Perusahaan.
• LRC dan LIC
• Discount Rate
▪ Program asuransi yang dirancang secara khusus untuk memberikan perlindungan bagi Lembaga Jasa Keuangan
penyalur dana kredit ke masyarakat.
• Significant insurance risk (Insurance risk or Finance risk)
• LRC dan LIC
• Discount Rate
43
IFRS•® Foundation
Produk asuransi top-up BPJS Kesehatan yang menanggung selisih biaya rawat inap akibat kenaikan kelas kamar
1 tingkat lebih tinggi yang terdaftar pada program Jaminan Kesehatan Nasional (JKN), sehingga mendapatkan
layanan lebih baik dengan premi terjangkau dan manfaat yang luas.
• Separated component
• LRC dan LIC
• Discount Rate
44
4 Section 3 - Actuarial Aspect
45
MEASUREMENT MODELS
Premium
PremiumCapital
allocation Variable
Variable fee
fee
General model Risk-Based (RBC)
Premium allocation Variable fee
General model allocation
approach (PAA) approach
approach
approach (PAA)
Why is it
Default model for all
insurance contracts IFRS 17: the first truly
To simplify for short term
contracts with little variability
To deal with participating business
where payments to policyholders
Discounted, risk adjusted are linked to underlying items like
DifferenceIFRS
a a a
needed? cash flows assets

• Long-term and whole life Why has IFRS 17 been
insurance, protection
contracts • Unit-linked contracts, US variable
Types of
business
• Certain annuities developed?
• General insurance annuities and equity
index-linked contracts
• Short-term life and
• US style universal life certain • Continental European 90/10
contract Jakarta, 12 July 2017
• Reinsurance written group contracts contract
• Certain general insurance • UK with profits contracts
Sue
Lloyd
contracts
IASB Vice-Chair
Mandatory, unless VFA applies Mandatory for direct

Mandatory? Optional
participating contracts
46
SEPARATED COMPONENTS
Premium allocation Variable fee

General model Premium allocation
Separation Variable fee
General model approach (PAA) approach
Distinct
investment
components
DifferenceIFRS
Accounting under IFRS 17
Insurance Embedded Standard for insurance

components Why has IFRS 17 been
derivatives, which are Accounting under IFRS 9
not closely related
contracts
developed?
Accounting under IFRS 15
Distinct performance Jakarta, 12 July 2017
obligation to provide
goods and Sue Lloyd
services
Accounting under IFRS 17,IASB
disaggregation
Vice-Chair for
Non-distinct presentation in income statement notes
investment components
1
Disaggregation
Financial instruments and other accountingis changes
the exclusion of an unseparated investment component from
insurance contracts revenue
Disaggregation1
47
LEVEL OF AGGREGATION

1 Portfolio = A group of contracts
Portfolio (a) subject to similar risks
(b) managed together
Permitted to group only contracts
At Contract Inception
2
Cohorts
DifferenceIFRS
issued no more than one year apart
3
Contracts not onerous at inception
Other No significant contracts

Onerous
contracts at
inception
profitable
contracts
possibility of
becoming (a)developed?
Assessment based on:
Likelihood of changes in estimates
onerous which, if they occurred, would
result in the contracts becoming Jakarta, 12 July 2017
onerous
(b) Using internal information Sue Lloyd
about changes in estimates
IASB Vice-Chair
AAloss
lossisis
CSM is recognized and released as
recognized
recognizedininthe
the
insurance service is provided
P&L
P&Latatinception
inception
Assessment is done at contract inception – no subsequent re-assessment
48
LEVEL OF AGGREGATION GROUPING OBJECTIVES
18
Portfolio 1
Entity divides each portfolio into groups
▪ contracts issued within the same year
Credit life insurance ▪ information about the contracts’ resilience
🗐🗐🗐🗐🗐🗐🗐🗐🗐🗐🗐🗐
▪ consistent with internal reporting
▪ exemption for regulatory pricing
▪ group not reassessed after initial recognition
Unearned profit
recognised is
as part
Profitable Contracts
have that at possibility
no significant initial recognition
of
🗐🗐🗐🗐 A
Group
of released
the liability
asand
becoming onerous subsequently, if any is
contracts Group B
are provided
insurance services
Other profitable contracts, if any
🗐🗐
Group C Contracts that are onerous at initial
Onerous A loss is
contracts recognised in P&L
🗐 recognition, if any
49
5 More Understanding Measurement Model
50
5.1 Building block approach
51
BUILDING BLOCK APPROACH

▪ Deferred profit absorbs assumption changes for
future coverage (“Unlocking”)
▪ Profit measured and reported based on the
delivery of the “insurance
Difference IFRS
coverage service”
Why ▪has IFRS
The measurement 17 of been
insurance contracts will
consist of a number of contracts
explicitly reported balance
developed?
which include BEL, RA, and CSM
▪ Discount rates based on Jakarta,
market 12 July 2017 rates
interest
(currency, duration, liquidity andSueasset –
Lloyd
dependency) IASB Vice-Chair
▪ Need to group contracts by portfolio, year of sale

and one of the three possible profitability levels
52
BUILDING BLOCK APPROACH - FULFILMENT CASH FLOWS

Example 1: No gain at inception Fulfilment cash flows
Profit that the insurer expects to
IFRS 17: the first truly make during the life of the
contract
PV of future cash
DifferenceIFRS
outflows
PV of future cash
inflows
Risk adjustment
NIL
Why has IFRS 17 been Contractual service
contracts margin (CSM)
Example 2:Day one loss

Fulfilment cash flows developed?
CSM cannot be negative, expected
losses recognised in PL
immediately. Need to track
separatelySue Lloyd
going forward.
PV of future cash IASB Vice-Chair
inflows PV of future cash
outflows
NIL

Risk adjustment
Loss
53

■ The estimates of CFs used to determine the fulfilment CFs shall include all cash inflows and outflows that
Contractual relate directly to the fulfilment of the portfolio of contracts:
service ● Current and explicit (separate from discount rate and risk adjustment)
margin ● Market variables as consistent as possible with observable market prices
● Incorporate all available information in an unbiased manner (including trends)
Risk ● Include all CFs within contract boundary
adjustment
Coverage period
Time value
of money
Cash inflows
Premium Premium
Cash flows within contract boundary Time

Future cash
flows Claims payments
Cash outflows
Claims including claim

Other payments handling cost
expenses/ taxes
Acquisition
costs
54
BUILDING BLOCK APPROACH – TIME VALUE OF MONEY
Contractual ■ Adjust the estimates of future cash flows for the time value of money using discount rates that:
service
margin
● Reflects characteristics of fulfilment cash flows
Risk ● Consistent with observable market 2 international
GAAPprices for instruments with cashIFRS
Difference flows that have
adjustment consistent characteristics withStandard
insurance contract,for
e.g., insurance
with respect to timing, currency
and liquidity Why has IFRS 17 been
Adjust observed market prices to reflect the characteristicscontracts
Time value
● of the liability/ the factors that
are relevant for the contracts, e.g., excludedeveloped?
of money
irrelevant risks, estimate the rate beyond the
period of observable data
● Consistent with other estimates used to measure the insurance contract (e.g. inflation,
discount rate for participating contracts) Sue Lloyd
Future cash IASB Vice-Chair
flows ■ Top-down approach or bottom-up approach
■ No need to discount cash flows which are expected to be paid or received in one year or less
55
BUILDING BLOCK APPROACH – TIME VALUE OF MONEY

Top-down approach Adjust for other characteristics of the insurance contracts
Current market rates of returns: either of own if necessary
asset portfolio or a reference portfolio
Illiquidity premium: Adjust for liquidity characteristics of
Adjust for risks that are not relevant to theGAAP 2 international
DifferenceIFRS
the insurance contracts

insurance contract, e.g., default risk, market risk
Why has IFRS 17 been Bottom-up approach

Adjust for duration differences if necessary (No need to contracts
Risk-free yield curve with similar characteristics
adjust for the difference due to liquidity) developed? (e.g., duration, currency)
Sue Lloyd
IASB Vice-Chair
56
BUILDING BLOCK APPROACH – RISK ADJUSMENT
■
Compensation that an entity requires for bearing the uncertainty about the amount and timing of the cash
flows that arise as the entity fulfils the insurance contract
Contractual ■ RA shall be included in the measurement in an explicit way (i.e. uncertainty should not be included in the
service
margin ■
future cash flows) IFRS 17: the first truly
No prescribed technique so different companies may use different techniques
Risk
■
technique international IFRS
Disclosure on the confidence-level is required if the entity uses a technique other than the confidence level
GAAP 2 Difference
adjustment Standard for insurance
Knowledge

About current
estimate and
Time value contracts
trend
of money
but high
severity
developed?
Low frequency Duration of
Contract
Sue Lloyd
Uncertainty Width of
Future cash due to lack IASB Vice-Chair
Probability
flows Of experience distribution
Risk
Adjustment
57
BUILDING BLOCK APPROACH – CONTRACTUAL SERVICE MARGIN
Contractual
service
margin zero.
■ At initial recognition, the CSM is defined as the negative of fulfilment cash flow, floored by
Risk ■ Purpose of recognizing a positive GAAP 2 international

initial CSM: DifferenceIFRS
adjustment ● To eliminate any day 1 gains (ifStandard for insurance
initial CSM is positive)
Why
● To represents the unearned has
profit that IFRS
the entity 17 been
recognizes as it provides services
Time value under the insurance contract
contracts
of money
■
developed?
If CSM is floored by zero at inception, the insurance contract is onerous.
IAI IFRS All loss
International should be
Seminar
recognized in P&L at inception Jakarta, 12 July 2017
■ Objective of the standard is to: Sue Lloyd

Future cash ● Provide principles for the measurement of an individual insuranceIASB Vice-Chair
contract, but
flows that in applying the standard an entity could aggregate insurance contracts
provided that it meets that objective; and
● Onerous contracts should not be aggregated with profit-making contracts
58
BUILDING BLOCK APPROACH – CONTRACTUAL SERVICE MARGIN
Contractual ■ Subsequently, the roll-forward calculation of CSM is summarized as follows:

service
margin
CSM at the beginning of the reporting period
Risk +Accreted interest

DifferenceIFRS
– Amount recognised for services provided in the period
adjustment
+/– Changes in the estimates of future cash flows
+/– Changes in RA relating to future coverage
Time value
contracts
of money
developed?
= CSM at the end of the reporting period
■ Locked-in rate at the inception of contract is used for accreting interest.
Sue Lloyd
Future cash ■ An entity should recognise the remaining contractual service margin in profit orIASB
loss over the coverage
Vice-Chair
flows period in a systematic way that best reflects the remaining transfer of the services. For contracts with no
participating features, the service represented by the contractual service margin is insurance coverage
that:
● is provided on the basis of the passage of time; and
● reflects Financial
the expected number ofand
instruments contracts in force. changes
other accounting
59
BUILDING BLOCK APPROACH – SUBSEQUENT MEASSUREMENT
To disaggregate changes in the measurement ofRisk-Based

the insurance contracts
Capital (RBC) in different line items of the financial
statements, depending on the sources of the changes.

Contractual service margin GAAP 2 international
DifferenceIFRS
Release of CSM Profit or loss:
Standard for insurance Underwriting result

Change in
estimates
Fulfilment cash flows Why has IFRS 17 been
Change in CFs
relating to
future services contracts
related to past and
current services
Future cash flows developed?
Release of RA Profit or loss:
related to past and
current services
Jakarta, 12Investment
July 2017 result
Risk adjustment
Sue Lloyd
Interest expense at
locked in discount IASB Vice-Chair
rate
Discounting
Other comprehensive
Effect of changes in income
discount rates
60
5.2 Premium allocation approach
61
PREMIUM ALLOCATION APPROACH - ELIGIBILITY CRITERIA
Reasonable
Coverage
NO
IFRS 17: the first
approximationNO
truly
period of
of the group
each
contract in
international
GAAP 2 DifferenceIFRS
measurement
using the core
the group
<= 1 year?
requirements
?contracts
developed?
YES YES Jakarta, 12 July 2017
May apply premium Must apply Sue Lloyd
allocation core IASB Vice-Chair
approach requirement
s
62
PREMIUM ALLOCATION APPROACH - SIMPLIFICATIONS FOR SHORT-TERM CONTRACTS

A B
Liability for Liability for IFRS 17
remaining coverage IFRS 17: the first truly
incurred claims Liability
DifferenceIFRS
Contractual
PV of future Risk PV of future
service Risk adjustment
cash flows adjustment cash flows
margin

Split in three blocks not required
contracts
A. Simplified measurement
developed?
B. Sue Lloyd
Measurement under the general model, but discounting of claims to be settled
IASB Vice-Chair
within 1 year not required
63
5.3 Variable fee approach
64
MEASUREMENT MODELS
Premium allocation
Premium allocation Variable
Variable fee
fee
General model
General model Risk-Based
Premium Capital (RBC)
allocation
approach
approach(PAA)
(PAA) approach
Why is it
Default model for all
insurance contracts IFRS 17: the first truly
To simplify for short term
contracts with little variability
To deal with participating business
where payments to policyholders
Discounted, risk adjusted are linked to underlying items like
DifferenceIFRS
needed? cash flows assets

• Long-term and whole life Why has IFRS 17 been
insurance, protection
contracts • Unit-linked contracts, US variable
Types of
business
• Certain annuities developed?
• General insurance annuities and equity
index-linked contracts
• Short-term life and
• US style universal life certain • Continental European 90/10
contract Jakarta, 12 July 2017
• Reinsurance written group contracts contract
• Certain general insurance • UK with profits contracts
Sue
Lloyd
contracts
IASB Vice-Chair
Mandatory, unless VFA applies Mandatory for direct

Mandatory? Optional
participating contracts
65
PARTICIPATING CONTRACTS - DEFINITION
What are participating contracts? How do they work?


DifferenceIFRS
Contractual
agreement
Participating contracts are insurance contract,
Investing
investments contracts with discretionary contracts
payments in
participation features and reinsurance contracts
where the performance of underlying items is
developed? underlying
items
shared between policyholder and insurer. Jakarta, 12 July 2017
Sue Lloyd
Performance of
the underlying
IASB Vice-Chair
items is shared
66
PARTICIPATING CONTRACTS - ELIGIBILITY
Direct participating contracts Risk-Based Capital (RBC)

Is contract eligible for variable fee approach?

DifferenceIFRS
Substantial proportion of change
Participates in a clearly identified Pay policyholder substantial of policyholder payments vary
pool of underlying items
share of the FV returns with change in FV of underlying
Why has IFRS 17 been items
contracts
developed?
All other participating contracts
Sueare defined as
Lloyd
indirect (general
IASBmodel).
Vice-Chair
67
PARTICIPATING CONTRACTS - ELIGIBILITY
How do they work? The insurer is entitled to 10% of

Risk-Based Capital (RBC) the change in the underlying
items as a fee for service

Investment Growth
Sharing investment
growth
DifferenceIFRS
CU 20
CU 1,000 +

Interest income
CU 90 =
CU 1,090
CU 1,000 CU 1,000 contracts
CU 1,100
Premium Investment
in
developed? Investment
in
Policyholder’
s position
underlying underlying
items items
CU 80
Sue LloydCU 10
Increase in value
IASB Vice-Chair
Insurer’s position
Start of coverage period

Financial instruments and other accounting changes End of coverage
period
68
DIFFERENCES WITH THE GENERAL APPROACH
Changes in financial variables – PL or OCI IFRS 17: the first truly Changes in financial variables – CSM subject to
risk mitigation solution
Changes in non-financial variables – PL or CSM

DifferenceIFRS
Changes in non-financial variables – PL or CSM
General Variable fee
Changes in insurer’s share in underlying items – Approach Approach contracts
Changes in insurer’s share in underlying items –
PL or OCI
developed? CSM subject to risk mitigation solution
Accretion of interest on CSM – Locked-in rate Effective accretion of interest on CSM – Current
rate
Sue Lloyd
IASB Vice-Chair
Discount rate reflects liability characteristics Discount rate reflects asset linkage
69
Exercise 1 – Building Block Approach
70
EXERCISE - BUILDING BLOCK APPROACH
Case study
■ Benefits
● 2-year term
IFRS 17: the
By applying
■ the first truly
building block approach
At issue: Total cash flows = 100 * 1,000 –
●

● Single premium of USD 1,000 10,000 – (10+10) * 3,000 – RA 2,000 =
● Sum assured = USD 3,000 28,000 Difference
Assumption
Therefore, CSM = 28,000
■ ■
contracts
● 100 policies sold, with deferrable expenses
incurred of USD 10,000
developed?
IAI IFRS
Under these
■ International
settings, Seminar
the total IFRS 17
● Best estimate assumption: 10 claims each year Jakarta,
insurance liability 12 July
at issue is: 2017
Risk adjustment (RA) = USD 2,000 ● Fulfillment cash outflows = (10+10)
Lloyd *
●
Sue
● No other cash flows 3,000 + RA 2,000 IASB
= 62,000
Vice-Chair
● CSM = 28,000
■ For simplicity, discount rate = 0% ● Total IFRS 17 insurance liability = 62,000 +

28,000 = 90,000
71
Case study
Start of Year 1
Accounting entries:
Dr IFRS
Cr 17: the first truly
Income statement:
Insurance contracts revenue -
1.0 Dr Est. future cashflow (Premium) 100,000 Incurred claims and expenses -
GAAP 2 international DifferenceIFRS

Cr Est Future Cash – Claim 60.000 Acquisition costs -
Cr Est Future Cash - DAC 10.000 Operating result -
Cr CSM
28,000 Investment income -
Cr RA
(Recognition of est. future cashflow [P - Cl - Co], Why hasBalance
2,000
IFRS 17
Profit
been -
RA and CSM) sheet: contracts

2.0 Dr Cash
Cr Est. future cashflow
100,000
100,000
developed?
Assets:
CashIAI IFRS International Seminar 90,000
(Premium received) Liabilities: Jakarta, 12 July 2017

Insurance contract liabilities:
3.0 Dr Est. future cashflow - DAC 10,000
Fulfillment cashflow: Sue Lloyd
Cr Cash 10,000 Est. future cashflow 60,000
IASB Vice-Chair
(Payment of deferrable expenses) RA 2,000
CSM 28,000
90,000
Equity:
Profits -
90,000
72
Case study ■ Profit driver assumed to be based on no. of policies

in- force:
■ At the end of year 1, ● The amortization factor = 28,000 / (90 + 80) = 164.7
■ There are 15 claims (as opposed to the 10 ● Based on the remaining policies at end of year 1
claims expected) (100– 15), the CSM amortization = 85 * 164.7 = 14,000
● The Company re-estimates year 2 claims as 8 ● However, there is also a favorable assumption
cases, down from 10 previously change, where claims are reduced by (10-8) * 3,000
● The updated RA = 1,000 = 6,000
● No other assumption changes ● Therefore ending year 1 CSM = 28,000 – 14,000 +
6,000 = 20,000
■ For end of year 1,

● The updated future cash flows = 8 * 3,000 = 24,000
■ Therefore total IFRS 17 insurance liability

● Fulfillment cash flows = 24,000 + RA 1,000 = 25,000
● CSM = 20,000
● Total IFRS 17 insurance liability = 45,000
73
Case study
End of Year 1
Accounting entries: Income statement:

Dr Cr Insurance contracts revenue 50,000
1.0 Dr CSM 14,000 Incurred claims and expenses (45,000)
Dr RA 1,000 Acquisition costs (5,000)
Dr Est. future cashflow (expected incurred 30,000 Operating result 0
claim) Investment income -
Dr Acquisition costs 5,000 Profit 0
Cr Insurance contract revenue 50,000
(Revenue recognition) Balance sheet:
Assets:
2.0 Dr Claims incurred 45,000 Cash 45,000
Cr Cash 45,000
(Claims recognition) Liabilities:
3.0 Dr Est. future cashflow 6,000 Fufillment cashflow:
Cr CSM 6,000 Est. future cashflow 24,000
(Recognition of impact of favorable change in future claims) RA 1,000
CSM 20,000
45,000
Equity:
Profits 0
45,000
74
Case study
End of Year 2
Accounting entries: Income statement:

Dr Cr Insurance contracts revenue 50,000
1.0 Dr CSM 20,000 Incurred claims and expenses (24,000)
Dr RA 1,000 Acquisition costs (5,000)
Dr Est. future cashflow (expected incurred 24,000 Operating result 21,000
claim) Investment income -
Dr Acquisition costs 5,000 Profit 21,000
Cr Insurance contract revenue 50,000
(Revenue recognition) Balance sheet:
Assets:
2.0 Dr Claims incurred 24,000
Cash 21,000
Cr Cash 24,000
(Claims recognition)
Liabilities:
Fufillment cashflow:
Est. future cashflow -
RA -
CSM -
-
Equity:
Profits 21,000
21,000
75
6 Understanding Onerous Contract
76
Fulfilment cash flows greater than zero Risk-Based Capital (RBC)

Discounting
Risk adjustment Loss
Expected cash out

Expected cash
flows
DifferenceIFRS
inflows
contracts
developed?
IAI IFRS International
Recognition Seminar
of loss for group of
contracts which
Jakarta, are onerous
12 July 2017 at
inception
An insurance contract is onerous at the date of initial recognition if the Sue Lloyd
fulfilment cash flows allocated to the contract, any previously recognised ❑ Pricing mayVice-Chair
IASB be performed at a
acquisition cash flows and any cash flows arising from the contract at the more granular level
❑ Data management and analytics
date of initial recognition in total are a net outflow.
Alignment of pricing strategy
Financial instruments and other accounting changes with intended accounting
treatment
77
UNDERSTANDING ONEROUS CONTRACTS

Insurers writing loss making business may face more profit and loss volatility
under IFRS 17 compared to non-loss making business.
Dec 202 1
2022
Jan Feb 2022 Mar 2022
Apr 2022
DifferenceIFRS
May 2022 Jun 2022 Jul 2022 Aug 2022 Sep 2022 Oct 2022 Nov 2022

contracts
developed?
IFRS 17 profit with
IFRS 17 initial loss
IFRS 17 profit with positive CSM
onerous contract with onerous contract
Sue Lloyd
IASB Vice-Chair
Increase Permanent
profit or loss reduction in
volatility net assets
78
ONEROUS CONTRACTS - EXAMPLE
Fact pattern:
❑ A contract with coverage period of 3 years.
❑ GAAP
Single premiums of 800 received immediately after
international
initial2recognition. DifferenceIFRS
❑ Expected claims and expenses of 1200, expected Standard
to be incurred evenlyfor insurance
❑
over the coverage period.
The cash outflows are paid immediately upon claims being incurred.
contracts
❑ Risk adjustment of 240, released evenly to SCI over the period. developed?
❑ The discount rate is 5%. Jakarta, 12 July 2017
Sue Lloyd
IASB Vice-Chair
79
Below is the determination of the FCFs andRisk-Based

CSM at initial recognition
Capital (RBC) for the group over the coverage
period:
Liability for remaining coverage (LRC) IFRS 17: the first truly
Exp.
Inflows
800
Net present value of claims
Exp. (1,089)
(1200)
Outflows
Risk (240) Why has IFRS 17 been
Adj.
FCFs (529) 800 – 1,089 - 240 contracts
CSM 0 developed?
Total Liability (529) Nil CSM as there is loss Jakarta, 12 July 2017
Loss Component (529) Sue Lloyd
IASB Vice-Chair
80

The entity allocates specified subsequent changes in fulfilment cash flows of the liability for remaining
coverage on a systematic basis between the loss component of the liability for remaining coverage and
the liability for remaining coverage excluding the loss component
DifferenceIFRS
Systematic Basis Proportion: Standard for insurance
contracts
Loss Component: developed?
IAI IFRS International Seminar 529
Liability Jakarta, 12 July 2017 1,329
Systematic allocation prop: Sue Lloyd 39.8%
IASB Vice-Chair
81
The entity allocates specified subsequent changes in fulfilment cash flows of the liability for remaining
coverage on a systematic basis between the loss component of the liability for remaining coverage and the
liability for remaining coverage excluding the loss component
Liability for Loss component
remaining GAAP international
of the2liability Liability for IFRS
Difference Insurance
Detail coverage: Standard
for remaining forincurredinsurance
claims contract liability
excludingWhy
loss has IFRS 17 been
coverage
component contracts
Opening balance -
developed?
- - Seminar
IAI IFRS International -
Cash inflows 800 - Jakarta, -12 July 2017 800
1089 – 800
1200 /3 Yrs Sue Lloyd
Insurance Service expenses:
loss on onerous contracts 529 IASB Vice-Chair
5% x 1089
529
Insurance revenue (289) - - (289)
Insurance service expenses - (191) 400 209
Insurance finance expenses 33 21 - 54
Cash outflows – - (400) (400)
Closing balance 60,2 % x 54 544 360 - 904
39,8 % x 54
82
7 Reinsurance Ceded Aspect
83
REINSURANCE CEDED
Overview of specific requirement

Specific guidance, but with assumptions GAAP 2 international DifferenceIFRS
consistent with the underlying insurance
contracts; extended guidance for
Accounting
Standard
Accounting
for insurance Measurement according to the standard
approach, risk adjustment and Why has IFRS 17 been
by cedant by reinsurer provisions for insurance contracts
presentation
contracts
developed?
Sue Lloyd
Reinsurance of future potentially Prospective Retroactive
IASB
Reinsurance Vice-Chair
of already incurred claims
occurring claims contracts contracts
84
REINSURANCE CEDED
Summary of requirement
Largely follows the approach for direct assumed business, but with some specific
considerations: IFRS 17: the first truly
Consistent assumptions in estimating future cash flows for RI contracts and that of
■
underlying insurance contracts
■ Allowance for non-performance by reinsurersStandard
within the future for insurance
cash flows
Risk adjustment – captures risk being transferred to the reinsurer (so difference
■
between gross and net) contracts
■
developed?
IAI IFRS International
CSM at initial recognition– captures net cost / net gain (unless retrospective Seminar
coverage)
■ Retrospective reinsurance arrangements
■ The decision on whether PAA is applicable needs to be considered separately for Sue
theLloyd
ceded
reinsurance IASB Vice-Chair
85
REINSURANCE CEDED
Specific issues for reinsurance contracts
Consideration Observation
A reinsurance contract might be written that only lasts one year but then provides
Coverage period
more than one year
attaching reinsurance) GAAP 2 international IFRS
coverage for the underlying exposure that runs for longer than one year. (e.g. risks
Difference
Open ended
contracts
Some reinsurance arrangements are written with an open ended renewal. However, a
renewal
developed?
contract boundary needs to be set for such reinsurance arrangements.
Reinstatement Reinstatement premiums may be treated as claims rather than premiums Sue
if they relate to
Lloyd
premiums claims experience.
IASB Vice-Chair
Ceding commission Ceding commission may be treated as claims rather than premiums if they relate to claims
arrangements experience.
86
6
Break
87
6
88
8 Impact of IFRS 17 for IT
89
Impact of IFRS 17
for IT
Angie Ng - Head of Technology & Software Insurance
Consulting And Technology Willis Towers Watson,
Singapore
MORE THAN A COMPLIANCE
EXERCISE
Key challenges faced by industry and
actuaries Risk-Based Capital (RBC)
Implementation Challenges

DifferenceIFRS
contracts
developed?
Sue Lloyd
IASB Vice-Chair
Commercial Challenges
91
WHY TO INVEST IN TECHNOLOGY SOLUTIONS AND IFRS
PREPARATION NOW?
Understand the financial impact
What are the potential differences prior vs after IFRS implementation, in terms of P&L and Balance Sheet?
Change in product development direction? IFRS 17: the first truly

Single premium saving products lose their attractiveness – capital intensive, unable to recognise all profits at inception post IFRS17
DifferenceIFRS
implementation. Focus on less capital intensive products, eg. ILP

Profitability and EV management
Understand the profit emerging patterns for different types of products. How will EV change after IFRS17?
contracts
Capital efficiency management developed?
What is the appropriate level of available capital? New business strain, EV vs required capital are some good indicators
Reporting efficiency enhancement (for near future consideration) Sue Lloyd

Look into data management and reporting processes .Identify the gap, refine the processes for IASB
timely Vice-Chair
and accurate financial
reporting
🗐 IFRS Gap Analysis - the exerciseFinancial

to discover the gaps and
instruments andidentify actions changes
other accounting
🗐 Technology Solutions - the tools to enhance reporting efficiency and help decision
making
92
IFRS 17 REPORTING
IFRSIFRS
17 17: the first truly
Reporting Difference
contracts
developed?
Automation
Data
Calculation And Sue Lloyd
IASB process
Management Vice-Chair
Efficiency
93
IFRS17 – KEY CALCULATION
COMPONENTS
Contractual ServiceRisk-Based
Margin Capital (RBC)
CSM ▪ Effectively a balancing item that eliminates day one gain
▪ Cannot be negative except for reinsurance
Risk adjustment ▪ Released as services are provided IFRS 17: the first truly Risk Adjustment
▪ Compensation the
▪ Adjusted to reflect impact of changes in best estimate assumptions insurer requires for
Total international IFRS
in respect of future service thereby reducing profit variability
GAAP 2
bearing uncertainty
Difference
▪ CSM discount rate “locked” at inception except for directly participating ▪ May reflect diversification
Insurance
Contract business Standard for insurance within and between
Liability
Market-
consistent Why has IFRS 17 been
▪ Modified “variable fee” approach for direct participation business
portfolios
▪ Disclosure of
Fulfilment
cash flows
value of contracts confidence level
cash flows developed?
Time Value of Money
Cash Flows
▪ Explicit ▪ Reflect liquidity Sue Lloyd

characteristics of cash flows
▪ Unbiased IASB Vice-Chair
▪ Consistent with observable
▪ Entity perspective
market prices
▪ Within contract
▪ Exclude factors not relevant
boundary
to the cash flows
94
CONTRACTUAL SERVICE MARGIN ROLL
FORWARD
CSM Progression – General Measurement Model
CSM at start of period

Experience adjustment for premium received
+ CSM for new contracts

DifferenceIFRS
Changes in estimates of cash flows relating to future
service
+ Interest at locked in rate Standard for insurance

Difference between expected and actual investment
component paid in the period
+/- Changes in cash flows contracts

Change in risk adjustment for future service
developed?
+/- Currency exchange CSM cannot be negative/loss reversal
- CSM allocated to period Allocation based on coverage units Sue Lloyd

IASB Vice-Chair
CSM at end of period Profit not yet recognized
95
SOME OTHER AREAS THAT WILL REQUIRE ACTUARIAL
JUDGEMENT
Grouping of Discount
contracts Risk-BasedRates
Capital (RBC)
GAAP 2 Difference
contracts
Risk adjustment principle developed?
Sue Lloyd
IASB Vice-Chair
96
IMPLEMENTING IFRS 17 REQUIRES A HOLISTIC
APPROACH …
PEOPLE
D
Training
Financial Impact analysis

+
TOOLS GAAP 2 Difference GAP Analysis
D Standard for insurance
Why has IFRS 17 been Business directions
+
IFR contracts Data requirements
PROCESSES
S developed?
IAI IFRS International SeminarActuarial models / reserving
D Jakarta, 12 July 2017
Software solutions
Sue Lloyd
+
Process
IASB Automations
Vice-Chair
TECHNICAL Technical Decisions

DECISIONS
D
97
IFRS 17 WILL REQUIRE NEW, SLICKER CALCULATION ENGINE AND
MODELS
More granularity and complexity in B/S and P&L for
Insurers Risk-Based Capital (RBC)
Model Capabilities / IFRS Requirements

Cash flows GAAP 2 Difference
Risk adjustment
and discount rates
Contractual servicecontracts
Par business
margin
Variable Fee Approach
developed?
Segmentation Jakarta, 12 July 2017
Reporting and disclosure
and contract boundaries requirements
Sue Lloyd
IASB Vice-Chair
Calculation engines and reporting systems need more flexibility but also ensure robust, reliable, repeatable and timely delivery of required
figures
98
ACTUARIAL MODEL PROCESSES NEED TO BE
INDUSTRIALIZED
▪ Separate models
Asset data ▪ (Unnecessarily) complex coding ?
▪ Ongoing reconciliation
Liability data
GAAP 2 Difference
Stochastic
Assumptions
Assumptions Why has IFRS 17 been
Model
Output
contracts
▪ Various sources
developed?
data
Deterministic
▪ Different responsibilities Jakarta, 12 July 2017
▪ Different formats / Liability model
interfaces Sue Lloyd
Input
IASB Vice-Chair
Reporting
Other
▪ Various reports
templates
▪ Spreadsheet cascades reports
▪ Manual adjustments
99
Impact of IFRS 17
for IT
IFRS 17 – Workshop PT BNI Life Insurance – issued
by PWC December 2018.
Impact of IFRS 17 for IT
10
IS THERE SOMETHING PLUG-N-PLAY IFRS 17 READY
TO BUY?
The following depicts a typical architectural model of anRisk-Based
insurance company
Capitaland the new requirements of IFRS 17.
(RBC)
Reconciliations,
Reconciliations,controls, workflow
controls, and
workflow process
and automation
process automation
Source data Data warehousing and aggregation Life Stochastic Risk

Actuarial and
Cash risk modelling models aggregation
GAAP 2 Difference
ETL
flow applications
Claims admin
model Standard for insurance Non-life ALM GRC
In force data
has IFRS 17 been modelling modelling Systems
Policy admin
Other internal
Actuarial calcs
and aggregation contracts
Finance Insurance accounting
General ledger
developed?
Accounting systems (sub ledger)
Extract scripts
data
Staging area
Commissions rules
ETL/ESB
management IFRS Extensions IAI IFRS International Seminar

engine Investment accounting
Tax
Historical data (sub ledger)
Cash admin Finance calcs and
(inc AR, AP) aggregation
and bank Reporting, KPIs and analytics Sue Lloyd
Assumptions and
Investment run parameters IASB Vice-Chair
management Consolidation Static reports User driven analytics
Risk calcs and
aggregation Disclosure
Reinsurance Cash flow model XBRL/iXBRL FP&A
Management
treaties output
Other (FX, Self-Service
ESG and
experience)
102
IT, SYSTEMS AND DATA
DEVELOPMENT
IFRS 17 will impact businesses well beyond the finance, actuarial and systems development areas (for example, product design and
distribution, development of revised incentive and wider remuneration
Risk-Based policies
Capital and reconfigured budgeting and forecasting
(RBC)
methodologies feeding into business planning). There could also be an impact on the cash tax position and dividends, both on transition
and going forward.
The following depicts a typical impact of IFRS 17 standard on insurer’s functional areas.
Inputs Data Calculations Close, Reporting IFRS 17 Requirements (Impacts)
Management Consolidate
12 9 The ability to source data with
Group Statuto
Policy Data Liability Allocations Reporting
ry GAAP 2 Service Margin (CSM) Difference
1 Contract
appropriate quality will allow
Calculations
2 Fulfilment Cash Flows (FCF) appropriate level of aggregation,
Data 3 Tax
Regulatory
Reporting
has IFRS 17 been
3 Risk Adjustment (RA) and automation when achievable,
will substantially reduce manual
Asset Data
Management
Capital Management contracts
4 Other Comprehensive Income (OCI)
workarounds and increase
RI Data
6 Calculations
Ledger Close
Reporting
Other Reporting
developed?
5 Discounting Factors
6 Reinsurance
effectiveness throughout.
Other 4 (Local statutory,
Calculations 7 Other) 7 Presentation – Insurance Revenue Jakarta, 12 July 2017
Other 5 Given the need of data and high
e.g. earnings, 8
Data (ESG, Planning & 8 Presentation – Inc Statement & Bal Sheet
Assumptions reliance of systems
Expenses, AP, accruals, Consolidation
Forecasting Sue Lloydin insurance
AR, Other) goodwill 9 Presentation & Disclosures company, technology aspect has
10 IASB Vice-Chair
Accounting Policy, Methodology & Assumptions and Transition
10 Transition become an even more important
factor for the IFRS 17
Functional Areas Impacted implementation.
Information Actuarial Technical Financial Planning &

Finance Controllership
Technology Functions Accounting Analysis
103
9 Transition
104
TRANSITION
Overview
Decide transition method by group of contracts
Full retrospective approach
GAAP 2 Difference
has IFRS 17 been
If impracticable
contracts
developed?
Modified retrospective approach OR Fair value approach
Sue Lloyd
• Modifications available if necessary given
reasonable and supportable information (*) IASB Vice-Chair
• Maximise the use of the information needed for
full retrospective approach
(*) If no reasonable and supportable information available, use fair value approach
105
TRANSITION
Estimating CSM on transition – Key requirements
Modified retrospective approach
■ When full retrospective approach is impracticable

■ Not all historical information is available
■ Several modifications are included (e.g. level of aggregation,
cash flows, discount rates)
■ Modifications to be applied to the extent ‘reasonable and
Full retrospective approach supportable information’ is available
■ Required when sufficient

“Fair value-based approach”
historical data exists and
hindsight is not required
■ When full retrospective approach is impracticable
■ No historical information about cash flows is available to
calculate the CSM
■ Insurance liability “calibrated” to fair value
■ CSM is positive difference between fair value and fulfilment value
106
10 Issues from a life Insurance and Taxation
107
ISSUES FROM A LIFE INSURANCE PERSPECTIVE
Summary
Best estimate is the current measure Underwriting result and finance result
Presentation and disclosure will have a new presentation. New KPIs,
of claims liabilities under IFRS 4
strategy, incentives and education are
required as well as system changes
Central estimate cash Level of aggregation/
flow onerous contract
Currently discount using risk free rates
(not all). OCI solution is new. High
GAAP 2 Difference
Greater granularity in measuring
operational cost to calculate OCI vs Standard for insurance and reporting onerous losses at
inception
P&L split.
Discounting has IFRS 17 been
Simplified approach
(PAA)
contracts PAA likely to be the most frequently
The disclosure of the confidence developed?
used measurement basis
interval for risk adjustment is current Reinsurance
practice. Allocation for onerous Risk adjustment measurement Jakarta, 12 July 2017
contracts and CSM determination Reinsurance mismatch between PAA
introduces new level of granularity Sue direct
and BBA between Lloydand
reinsurance
IASB Vice-Chair
Contractual service
Transition
margin
CSM approach is complex and brings Challenging but much of the required
changes in assumptions about the data expected to be available albeit at
future into the current period a more aggregated level
High Medium Low
impact impact impact
108
ISSUES FROM A LIFE INSURANCE TAXATION
Financial Accounting Standards (PSAK) BERBEDA

Risk-Based Capital (RBC) Government (Tax Regulation)
Temporary Vs Permanent Different

Currently Tax Office did not accept IFRS 17
GAAP 2 Difference
1. The implementation of IFRS 17 on or after 1 Januaryhas IFRS
2023 (2025) is the 17 been change in reporting of
most significant
financial statements for insurers in the past decade. contracts
developed?
2. Taxes may have an effect on the measurement of the insurance liabilities under IFRS 17. The implementation of
the IFRS 17 standard, however, has also implications on the calculation of current and deferred taxes.
Sue Lloyd
3. Some direct and indirect tax cash flows are in the scope of the IFRS 17 measurement model
IASB and play a role when
Vice-Chair
determining the fulfilment cash flows to assess the IFRS 17 technical assets and liabilities. When implementing
the requirements, insurers should consider both technical and operational aspects for Taxes Purposes.
109
ISSUES FROM A LIFE INSURANCE TAXATION

4. Additionally, current and deferred income taxes of insurers are significantly affected by the new concept of
accounting for insurance contracts.
5. In tax regimes where taxable profits are calculated based upon an accounting profit calculated in accordance with
IFRS, the adoption of the new standard will have current tax consequences (IFRS 4 – PSAK 62 vs IFRS 17 – PSAK 74).
GAAP 2 Difference
6. Standard for insurance
To recognize the IFRS 17 impact on the reporting process, insurers must analyze the respective tax impact on each
has IFRS 17 been
stage for their company and adjust their operating model regarding policies, processes, people, and data and
systems: contracts
❑
developed?
Adjusting company policies, data and systems with regard to tax reporting
IAI IFRSand tax accounting
International Seminarrequirements
under IFRS 17 and expected future tax payments for IFRS 17 measurement models Jakarta, 12 July 2017
❑ Alignment of manual and automatic processes for income tax reporting taking potential tax impacts from local
tax regimes into account Sue Lloyd
❑ Integration of tax in IFRS 17 projects and reporting process by creating awareness from
IASB Vice-Chair
internal stakeholders
❑ Training of tax, finance and accounting teams
110
11 Operational Implications
111
OPERATIONAL IMPLICATIONS
The big picture
2. Performance
Risk-Based Management
Capital (RBC)
► Changes in MI reports and KPI’s 3. People
1. Policy ► Planning, budgeting and
► Training
► New accounting policies/procedures forecasting processes need to be ► Cross functional collaboration (especially
and control documentation adjusted
► IFRS 17 methodology guidance and reporting
for Finance & Risk)
► VBM, scorecards and incentive schemes
► Project resourcing & budget
instructions
► Managing change fatigue
► GL Chart of Accounts changes and account
mappings Performance
► Assumptions setting (modelling) Policy GAAP People
2
Management Difference
4. Organization
► Investment policy changes (TFRS 9)
Standard for insurance ► Roles and responsibilities between
Actuarial and Finance
has IFRS 17 been ►

departments
Technical Provisions Assumptions/
Organization
contracts Expert Judgement Committee
5. Data
► Refinement, upgrading, conversion and
migration of (complex) actuarial
Data
developed?
Process
Technology
► Impact on outsourcing contracts
valuation models 7. Technology

► New financial reporting data
Jakarta,
► 12 July
Core systems, 2017 system,
investment
requirements (input/output) actuarial systems, pricing systems,
► Data reconciliations at different levels etc. Sue Lloyd
6. Processes ► Posting logic/engines
► Data quality, storage and archiving
► Data security & controls
► Materiality concepts/guidelines ► IASB
General Vice-Chair
Ledger, consolidation
► Updating closing and reporting processes, and reporting systems
► Data governance and master data
planning processes, actuarial processes, risk ► System interfaces
management
management etc. ► Current system capacities &
► Internal and external reporting capabilities (agile technology)
templates including group reporting ► New functionalities/features
packages
► Internal controls and audit trail
112
OPERATIONAL IMPLICATIONS
We recommend a phased approach to manage the timely implementation of IFRS 17
Perform current state Design desired state and Implement new processes and
assessment develop new architecture systems
■ New accounting
■ Execute planned
policies and
■ Do detailed GAAP 2
proforma financial
Differenceimplementation
gap analysis
statements ■ Go live with new
has IFRS 17 been systems architecture
1 2 3
■ Perform financial ■ Design desired ■ Perform parallel
and operational
impact
system landscape
contracts runs
■
assessments
Start with
■
developed?
Tackle issues
identified during the
operational impact
■ Ensure wider
managed impact is
business
appropriately
resource planning assessment Jakarta,
■ 12 July
Discuss 2017
issues with
auditors/regulators
■ Educate key ■ Design actuarial
stakeholders and finance target ■ Sue Lloyd
Workshops and
operating model trainings
■ Allocate people IASB Vice-Chair
2022-2023 2023-2024 2024-2025
113
11
12 Approach and Methodology
115
APPROACH AND METHODOLOGY
FINANCIAL AND ACCOUNTING REPORTING

Financial impact study and reporting on
the critical issue of: IT SYSTEM
a. Insurance contract separation • Policy master file system, in particular to
b. Opening CSM determination calculate the insurance contract liability
c. CSM subsequent measurement under from the future cash flow
various scenario determination: • Assess readiness of IT infrastructure
✔ Experience costing determination (core and core system)
(full or relevant) • Assess IT requirements of IFRS 17
✔ Amortization method determination Standard
✔ Discount rate determination • Assess impact towards IT system
d. IFRS 17 Transition Method • Business requirements of IFRS 17
e. Presentation and Disclosure requirement • Identify process requirements
Critical Issues
of IFRS 17 ACTUARIAL
• Actuarial specialty that determines insurance

product (whether there is an uncertainty product
TAXATION or not);
• Each product cash flow determination;
• Contract with policy holder;
• Taxation still uses PSAK 62 in
• Measuring experience cost;
determining technical reserves,
• Determining product profitability;
• All of the profit/loss for CSM and • Determining insurance business portfolio (similar
discount rate changes, risk adjustment, risk and managed together); and
and fulfilment cash flow will be • Determining BBM, PAA, or VFA modeling (PV CF,
corrected in the tax report Discount rate using OJK average interest rate or
at the date of reporting).
116

Performing GAP Analysis
Training IFRS 17 for Employee and Management Current condition and IFRS 17 requirements
Phase 1 – Awareness of Impact Phase 2 – Gap Analysis
(2023) (2023)
Working Group Discussion IFRS 17 Road Map
Based on IFRS 17 Training
GAAP 2 Difference
has IFRS 17 been
Performing GAP analysis on current condition and IFRS 17
requirements
contracts
• Identification of data and information requirement for IFRS 17
Training IFRS 17 for employee and management
• Understanding by basic and advance training developed?
Preliminary financial impact analysis due to:
a. Product classification and portfolio;
b. Product modelling;
Working group discussion based on IFRS 17 training Jakarta, 12 July 2017
c. Expected CSM and profitability product;
• Working group strategic project
d. Sensitivity Analysis
• Assess current product by illustrative example
•Readiness of IT Infrastructure Sue Lloyd
IASBand
•Review of Financial Accounting Policy Vice-Chair
Procedure
IFRS 17 road map

• Assist the creation of the company’s IFRS 17 road map
117

Actuarial aspects
• Coordination and discussion with Actuary in setting up assumptions and
methodology
Actuarial aspects • Coordination and discussion with Actuary in assessing financial impact
• Review working assumptions: unit of account, CSM amortization,
Phase 3 - Design and discount rate, contract boundaries, unbundling, etc.
IT aspects • Financial impact analysis due to:
Methodology (2022 – 2023)
a. Product classification and portfolio;
GAAP 2 b. Product modelling;
Difference
Financial Accounting
aspects Standard for insurance
c. Expected CSM and profitability product;
has IFRS 17 been
d. Analysis volatility;
e. Discuss for sources of profit, etc.
contracts
developed?
IT aspects Financial Accounting aspects Jakarta, 12 July 2017
• Identify and assess impact to IT system • Coordination and discussion with Actuary in setting up assumptions and
• Provide high-level assessment of the impact on IT architecture: feeders, methodology
Sue Lloyd
modelling, technical sub-ledger, accounting and controlling • Coordination and discussion with Actuary in assessing financial impact
• Analyze and provide on IT solution strategy to address the business • Prepare technical position paper IASB Vice-Chair
requirement of IFRS 17 standard
• Identify process requirement and workshops with your and the pilot
business unit
• Analyze and provide target operating model
• Assess readiness of IT Infrastructure (core and core system)
118

Presentation and Disclosure
Template of supporting report for

Phase 4 – Implementation and
IFRS 17 & 9 constructed based on
Reporting (2024 – 2025)
best practices
GAAP 2 Difference
Accounting aspectshas IFRS 17 been
contracts
developed?
Implementation and Reporting
• Presentation and Disclosure, Chart of Account, and template of support
reporting
• Accounting policy and manuals Sue Lloyd
• Target operating model: IASB Vice-Chair
Implement operating model including modifying and enhancing current
process
• Project Management Office (PMO)
• Training for transition to the new implemented model
119
STRATEGI IMPLEMENTASI IFRS 17
Awareness Gap Analisis Requirement Design Implementation Parallel Run

• Review, test and finalize
Impact (19 Critical Detail • Technical cash flow projection • Subject Metter
(Training) Issue) • Review expense Position Paper model
• Review transition
Expert (SME)
allocation model (TPP) support and
• Accounting • Accounting approach
review of IFRS
• Review design of • Evaluate implementation
• Actuarial • Actuarial transition (opening balance 17/ PSAK 74 Q1
• Data, System & • Data, System & FS, COA, journal preparation
scheme approach 2024 report
Process Process • Subject Metter Expert
• Review Business applicability (SME) support and • Training on IFRS
requirement • Develop COA review UAT testing as 17/ PSAK 74
of 1/1/2024 requirements,
document (BRD) and journal • Subject Metter Expert
scheme (SME) support during impact and
build and test of new applicability
COA and journal
schemes
1 2 3 4
6
5
120
13 Focus Group Discussion Impacts Of IFRS 17
121
HOW IFRS 17 WILL IMPACT OUR RISK ASSESSMENT AND PRODUCT DEVELOPMENT ??

❑ Meninggal dunia baik secara alamiah atau meninggal pada umur
muda karena sakit, kecelakaan dan lain-lain
❑ Cacat badan (disability, invalidity, incapasity) karena sakit atau
Risks of Human Life kecelakaan
❑ Hilangnya atau merosotnya kesehatan (loss of death)
❑
GAAP 2
Umur tua (old age)
Difference
❑ Standard for insurance
Pengangguran (unemployment)
has IFRS 17 been
contracts
❑ Produksi
developed?
IAI IFRS
asuransi jiwa adalah jasa yang International
berbentukSeminar
proteksi dan
tabungan Jakarta, 12 July 2017
❑ Inti produk asuransi jiwa adalah plan asuransi yang terdiri dari
Sue Lloyd
Produk asuransi jiwa Benefit plan dan Premium plan
IASB Vice-Chair
❑ Benefit plan adalah plan mengenai manfaat asuransi yang dijanjikan
dan merupakan kewajiban penanggung (=hak pemegang polis)
❑ Premium plan adalah plan mengenai pembayaran premi dan
merupakan kewajiban pemegang polis / tertanggung (=hak penanggung)
122
HOW IFRS 17 WILL IMPACT OUR OPERATING MECHANISM?
2
Insurance company / Insurer Reinsurer
Investee companies
GAAP 2 Difference
1 Standard for insurance
has IFRS 17 been3
Agent / Broker contracts
Beneficiaries
developed?
Sue Lloyd
IASB Vice-Chair
Policyholder / Policyowner Life insured
123
HOW IFRS 17 WILL IMPACT OUR MARKETING ACTIVITY?

❑ Branch system
Marketing
❑ Agency / brokerage system
GAAP 2 Difference
has IFRS 17 been
contracts
Head Office
developed?
Sue Lloyd
IASB Vice-Chair
Branch Representative Off.
124
HOW IFRS 17 WILL IMPACT OUR UNDERWRITING ACTIVITY ?

❑ Kelas-kelas resiko:
▪ Standar
▪ Substandar
Underwriting
▪ Declined (ditolak)
❑ Makin tinggi resiko seseorang, makin ketat dan luas syarat-syarat seleksi
yang harus dijalani. GAAP 2 Difference
has IFRS 17 been
❑ Kelas-kelas resiko: ❑ Berbagaicontracts macam sumber
▪ Standar developed?
penyebab
IAI risiko: Seminar
IFRS International
▪ Substandar ▪ JenisJakarta, 12 July 2017
pekerjaan
▪ Declined (ditolak) ▪ Penyakit Sue Lloyd
▪ Hobby tertentu
IASB Vice-Chair
❑ Makin tinggi resiko seseorang, ▪ Kebiasaan menggunakan obat
makin ketat dan luas syarat-syarat ▪ Kebiasaan merokok
seleksi yang harus dijalani. ▪ Usia, dll
125
ASIAN WEIGHT RATINGS
GAAP 2 Difference
has IFRS 17 been
contracts
developed?
Sue Lloyd
IASB Vice-Chair
126
HOW IFRS 17 WILL IMPACT OUR REINSURANCE ACTIVITY ?
GAAP 2
❑ Prinsip dasar Standard
Difference
asuransi = membagi/menyebarkan
for insurance
Reasuransi resiko. has IFRS 17 been
contracts
❑ Tiap perusahaan asuransi
developed? jiwa memiliki
kemampuan menanggung resiko yang
Jakarta, tidak
12 July 2017 sama
besarnya tergantung pada berbagai Sue Lloydfaktor,

IASB Vice-Chair
antara lain kekayaan.
127
HOW IFRS 17 WILL IMPACT OUR REINSURANCE ACTIVITY ?
Bagian-bagian penting dari polis :

▪ Identitas pemegang
GAAP 2 polis
Difference
▪ Standard
Jenis risiko yang for insurance
dijamin (benefit plan)
Aktivitas has IFRS 17 been
▪ Mulai dan berakhirnya jaminancontracts atas risiko
Penerbitan Polis
▪ developed?
Besarnya uang asuransi
▪
Besarnya premi dan cara pelunasannya
▪
Sue Lloyd
Mulai dan berakhirnya pembayaran IASB Vice-Chairpremi
▪ Nama beneficiary
128
HOW IFRS 17 WILL IMPACT OUR LIFE INSURANCE POLISHES ?
❑ Semua unsur-unsurRisk-Based Capital (RBC)

yang terpaut, dirancang demikian rupa untuk suatu jangka
waktu tertentu diwaktu yang akan datang dengan menggunakan beberapa
asumsi aktuarial.
❑ Benefit plan, berbagai plan asuransi jiwa dapat dirancang dengan

memperhatikan unsur proteksi
GAAPdan
2 tabungan. Difference
Dapat diperluas juga dengan
asuransi jaminan tambahan.
Aktivitas Standard for insurance
Penerbitan Polis ❑ has rate
Premium plan, untuk perhitungan IFRS 17dipergunakan
premi been asumsi mortalita,
interest, dan loading expense. contracts
❑ Cara menentukan besarnya premi: developed?
▪ Besarnya uang pertanggungan Jakarta, 12 July 2017
▪ Umur tertanggung
▪ Cara membayar premi Sue Lloyd
▪ Masa asuransi IASB Vice-Chair
▪ Jenis asuransi
▪ Jenis resiko tertanggung: standar/substandar
129
HOW IFRS 17 WILL CLASSIFY MEASUREMENT MODEL OF LIFE INSURANCE POLISHES?
❑ The insurance company promises to pay a benefit if the insured dies during a specified period of coverage.
They can be issued for a specific number of years or to specific age of the insured. A term life policy does not
accumulate cash value and the insurance company owes nothing at the end of the term specified in the
Term Life Insurance contract. Term life insurance has three basic plans:
▪ Level term
▪ Decreasing term (credit life)
▪ Increasing term
❑ A whole life insurance policy is designed to mature when the insured reaches the age of 100. If the policy
GAAP 2 Difference
owner pays every premium from the date of the policy issue until he/she attains the age of 100, the policy

would be fully paid-up (the cash value would equal the face value) and premium payments would cease. If the
policy owner dies during the term of the policy, the insurance company will pay the face amount. This type of
has IFRS 17 been
policy also accumulates cash value, which means the policy owner can borrow the funds by paying a low
Whole Life Insurance

interest rate.
contracts
❑ The basic forms of whole life insurance policies are:
▪
▪
Straight whole life
Limited pay whole life
developed? IAI IFRS International Seminar
▪ Single premium whole life Jakarta, 12 July 2017
▪ Modified whole life
❑ Endowment policies provide not only for the payment of the policy face on the death Sueof Lloyd
the insured during a
Endowment Life Insurance fixed term of years, but also the payment of the full face amount at the end ofIASB
the term if the insured is living.
Vice-Chair
❑ It is actually an investment and retirement planning vehicle, not insurance.

❑ For individuals that are already retired or financially secure, annuity insurance can provide a convenient
Annuity Life Insurance means of managing the investment and immediate pay out of already accumulated funds. It offers a wide
variety of options that are flexible and tax conscious for managing the distribution of capital.
130
Variable Life Insurance

AWAL PERTANGGUNGAN AKHIR PERTANGGUNGAN
GAAP 2 Difference
has IFRS 17 been
Separate Account
contracts
Not Guarranted developed?
Resiko
Ditanggung
peserta
Sue Lloyd
❑ The policy owner has the opportunity to achieve huge gains in the cash value.
❑ Four main aspect in variable life insurance: IASB Vice-Chair
▪ A new concept, the separate account is presented;
Variable Life Insurance ▪ The policy owner assumes the risk for the performance of the policy;
▪ A minimum guaranteed death benefit is provided based on an assumed rate of interest; and
▪ The product is a security which adds significant new rules and regulations.
131
Universal Life Insurance

AWAL PERTANGGUNGAN
Risk-Based Capital (RBC) AKHIR PERTANGGUNGAN
GAAP 2 Difference
has IFRS 17 been
Separate Account
contracts
Guarranted
developed?
Resiko
Ditanggung
Perusahaan Jakarta, 12 July 2017
Sue Lloyd
❑ Universal life insurance introduces three new characteristics:
IASB Vice-Chair
▪ Premium flexibility
Universal Life Insurance ▪ Death benefit options
▪ Partial withdrawals
❑ Two death benefit options are:
▪ Policy owner designates a specific amount of death benefit.
▪ Policy owner designates the death benefit to be the face amount plus the cash value.
132
Thank You For
Your Attention
133

1SRixmyEWip8Mcpo1XEe UK61PZeuXosr

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

1SRixmyEWip8Mcpo1XEe UK61PZeuXosr

Uploaded by

Copyright:

Available Formats

IFRS 17

Implementation Issues in Life Insurance - General Overview

2 General overview of IFRS 17

2.3 Implication to Management and Stakeholders

2.4 Business Implications

2.5 Changes in FS Presentation and Disclosure

2.5 Key focus areas of the standard

3 Understanding Insurance Business and Its Product

3.1 Insurance Value Chain

3.2 Understanding Insurance Business and Its Product

4.1 Measurement model

4.2 Separated components

4.3 Level of aggregation

5 More Understanding Measurement Models

5.1 Building block approach

5.2 Premium allocation approach

5.3 Variable fee approach

6 Understanding Onerous Contract

7 Reinsurance ceded aspects

8 Impact of IFRS 17 for IT

10 Issues from a life insurance and Taxation

12 Approach and Methodology

13 Focus Group Discussion

Ludovicus Sensi W Antonius Djohan N, CISA

IFRS17 - ACCOUNTING LEADER TECHNOLOGY INFORMATION

IFRS 17: the first truly

The views expressed in this presentation are those of the presenter,

• IFRS 17 issued onIFRS

IFRS 17: the first truly

Copyright © IFRS Foundation. All rights reserved

IFRS 4: Lack of Comparability

Source: Effects Analysis on IFRS 17

Discount rates used today by IFRS insurers

Current rates Historical rates Mix of rates

Discount rates used for a sample of life insurers (2015)

Net income 965 337 628 Sue Lloyd

Source: Effects Analysis on IFRS 17

IFRS 4 – Lack of transparency or useful IFRS 17 – More transparent and useful

IASB Implementation Support

■ Changes in KPI – Adjustments to the Performance Management

Investors perspective: Revenue & Profit

Business perspective: Financial

Operational perspective: Finance, Risk,

Accounting policies / financial statements

New COA, mapping

Need to decide multiple accounting choices

Determine desired level of aggregation Data: availability & granularity

Finance, actuary, technology, operations: Getting Project &

What are the key accounting &

?Will there be convergence ? ?

Statement of Comprehensive Income

Statement of Financial Position

Assets IFRS 17: the first truly

Provides up-to-date market consistent Underwriting revenue and expenses are

IFRS 17: the first truly

Risk-Based Capital (RBC)

Building block approach /

variable fee approach

Why has IFRS 17 been

Financial instruments and other accounting changes

Risk-Based Capital (RBC)

Contractual IFRS 17: the first truly

+ Standard for insurance service result)