Recovery and resolution planning considerations for insurers

In recent years, regulators have demonstrated an increased interest in recovery and resolution planning. All firms should be concerned with their resilience to increased volatility, changes in regulation, and operational risk events and be ready with a proactive approach which considers the recovery response in advance. Milliman’s Kyle Audley and Fred Vosvenieks provides some perspective in this paper.

New business helps drive 19% embedded value (EV) growth for life insurers in Asia

Milliman today announced the findings of its study on reported year-end 2017 embedded value (EV)/value of new business (VNB) results for 31 major insurance companies operating in Asia, excluding Japan. The report highlights trends in published EV results, including a total growth in reported EV in 2017 of 19.2%, and similarly a 19.1% growth in value of new business (VNB).

Beyond EV results, the Milliman 2017 Embedded Value Results: Asia (excl. Japan) report analyses and discusses the EV methodologies and assumptions, the impact of regulations, as well as recent developments with IFRS 17 as it gains momentum in the region.

“China’s clampdown on high guarantee universal life sales reduced premium volumes but had little effect on EV and VNB results due to profitability of this line of business typically being very low or even negative,” said Milliman principal and consulting actuary Paul Sinnott. “Overall, those insurers that successfully reoriented their product strategies from savings to protection business seem to have performed best”

A few key insights from the Asian report include:

• EV growth across Asia ranged from 10% to 28%, with 2017’s total reported Asian EV increasing by 19.2% on a comparable basis to USD 480 billion, up from USD 403 billion in 2016.
• South Korea, citing profitable new business, efficiencies gains, and a change in investment assumptions, reported the highest comparable EV growth, at 22%, with Hong Kong and China reporting the next highest total EV growth, at 21%.
• Life insurance sales decreased slightly overall, with gross written premium (GWP) estimated to have reduced by 4%. This was largely due to China’s USD 32 million decrease in GWP, mainly as a result of the restrictions imposed on the sales of universal life business.
• VIF increased for all markets. South Korea recorded the largest VIF growth of 103%, mainly as a result of increased investment return assumptions reflecting the yield curve rise last year; Hong Kong also posted strong VIF growth of 20%, largely driven by high volumes of new business from mainland Chinese visitors.

A copy of the report detailing these and other pertinent trends is available for download at Milliman.com.

Assessing and quantifying cyber risk in M&A deals

Quantifying cyber risk in mergers and acquisitions (M&A) deals is challenging. As cyber events have increased in scope and complexity, investors are requiring that the quantification of a target entity’s cyber exposure be part of their due diligence. The more capable an entity is in measuring cyber risk, the greater advantage it has during M&A negotiations.

In this article, Milliman’s Chris Harner and Lisa Henderson explain how organizations can quantify the risks in order to provide a better valuation of a target entity and overall risk profile of the transaction.

U.S. GAAP Targeted Improvements for Long Duration Insurance Contracts

The Financial Accounting Standards Board issued accounting standard update 2018-12 on August 15. It contained targeted changes to the accounting for long-duration insurance contracts. This paper by Milliman actuaries William Hines, Zi Xiang Low, and Karthik Yadatore summarizes the main resulting changes to the accounting of life insurance and annuity products.

Majority of insurers believe insurtech will affect business in near future

InsureTech Connect 2018 kicks off in Las Vegas in under a month, and Milliman is pleased to be a title sponsor of the event. This year more than ever, the intersection of insurance and technology are at the forefront of our collective industries.

A recent Milliman survey found that 96% of surveyed companies across 10 sectors believe insurtech will affect their business in the near future. And over 75% of insurance company respondents believe insurtech can be used to develop new products and business models. Milliman’s survey includes responses from 580 companies across 10 industries, with valuable insight into the perceived impact of insurtech. Below is an infographic detailing the study results.

What is the current captive insurance landscape?

Milliman’s Mike Meehan was recently interviewed by A.M. Best TV at the annual conference of the Vermont Captive Insurance Association (VCIA). He discusses the development of new captives in a soft market,  the types of captive being developed, and the risks captives are insuring.