The economy after COVID-19 may look very different from before the crisis and may involve the use of hitherto unfamiliar fiscal and monetary tools. These tools have the potential to fundamentally change conventional economic relationships and market conditions. The insurance industry is going to have to adapt to this new environment. Milliman consultants Thomas Bulpitt, Paul Fulcher, and Russell Ward offer more perspective in their paper “Economic responses to COVID-19: ‘Extraordinary times call for extraordinary measures.’”
In the United Kingdom, unit-linked insurance makes up the largest proportion of the life insurance market. According to the latest set of Solvency and Financial Condition Reports (SFCRs), in 2017, 60% of the technical provisions (equating to approximately £1.1 trillion) and 69% of the gross written premiums for UK life insurers related to unit-linked business. Approximately 11% of all unit-linked business in the UK is reinsured, equivalent to approximately £127 billion or 66% of all reinsurance in the UK life insurance market.
This paper by Milliman consultants summarises a number of the most material developments affecting unit-linked insurance business that occurred during 2018 and which remain areas of ongoing focus.
Since the publication of International Financial Reporting Standard (IFRS) 17 in May 2018, the insurance industry has begun the implementation process in advance of the original effective date of 1 January 2021. However, following the tentative decision of the International Accounting Standards Board (IASB) in late 2018, the effective date is likely to be postponed to at least 1 January 2022.
As the industry has begun to implement the Standard, a number of issues, both practical and theoretical in nature, have been raised. These issues have been brought to the attention of the IASB through the Transition Resource Group (TRG), and also through industry bodies and groups such as the CFO Forum.
At its October 2018 meeting, the IASB agreed a set of criteria by which any proposed amendment to IFRS 17 would be assessed:
• Any amendment should not result in significant loss of useful information in respect of relevance and faithful representation, comparability and internal consistency and complexity and understandability
• Any amendment should not unduly disrupt implementations processes or risk undue delays to the effective date
At the January 2019 IASB meeting, four of these issues were discussed and the IASB tentatively approved a number of amendments to the Standard. This paper by Milliman’s Thomas Bulpitt provides an overview of those amendments and the outcomes of the discussions.
There are a number of areas of International Financial Reporting Standard (IFRS) 17 where the International Accounting Standards Board has allowed firms to make choices on their approaches. This paper by Milliman consultants focuses on the approaches available under IFRS 17 for the derivation of the discount rates for use in the various calculations required by the Standard.