2021 Asia-Pacific Annual Symposium Highlights

The impact of the pandemic on risk management, financial reporting and product management Hassan Scott Odierno

Photo: iStock.com/ALLVISIONN

The Society of Actuaries (SOA), in partnership with the Actuarial Institute of Chinese Taipei (AICT), hosted the 2021 Asia-Pacific Annual Symposium in June 2021. Due to the COVID-19 pandemic, the two-day event was conducted in a fully virtual format for the safety of attendees and staff. The theme this year was “Future Horizon—Impact of Pandemic on Risk Management, Financial Reporting and Product Management.”

The symposium started with a keynote speech by Angat Sandhu entitled “Future of Insurance.” In this speech, he highlighted that although there has been innovation in life and health insurance, the greatest amount of innovation has been in automobile insurance, with many massive changes expected over the next five to 10 years. He also pointed out some areas where insurers can be disrupted—for example, customer engagement, direct to customer, aggregators and services, product and analytics, underwriting and servicing. He then suggested some improvements for insurers and InsurTech, such as shifting from being product-centric to customer-centric, product innovation with modular solutions, distribution and customer experience excellence, developing partnerships with other industries to maximize value, and upskilling and improving capabilities.

Other presentations to kick off the event included one on the prolonged low interest rate environment for Asia insurers by Tze Ping Chng and the impact of International Financial Reporting Standard (IFRS) 17 and insights into implementation by Ophelia Au Yeung and Martin Zhao. From there, the symposium split into two tracks: IFRS 17 and Digital/Data Analysis for the rest of the first day, and Product Design and Development and ERM/ALM/Low Interest Rate for the second day.

During “The Rise of Digital Life Insurers” session presented by Michael Chan, he mentioned some of the perceptions of digital insurers—that people think the digital life insurance model won’t work because insurance is sold and not bought, that people need to talk to someone (physical interaction) and that the acquisition costs are higher than expected. He also mentioned the thought that once the big insurers start paying attention, they will crush the digital market—that these large insurers think these (currently) small companies are toys and it’s just a gimmick. Chan went on to show the success of his own company in dispelling these perceptions.

Emerging Risks

In the morning of the second day of the symposium, R. Dale Hall, managing director of Research at the SOA, presented an insightful session on global emerging risks. During the session, Hall presented the findings of the 14th Annual Survey of Emerging Risks, which was authored by Max J. Rudolph, FSA, CERA, CFA, MAAA, and sponsored by the Canadian Institute of Actuaries (CIA), the Casualty Actuarial Society (CAS) and the SOA. Hall compared the feedback from the symposium audience with some of the survey findings in terms of top current risk, the global economic outlook for 2021 as well as emerging risks by category. The details are shown in Figures 1, 2 and 3.

Figure 1: Top Emerging Risks—Conference Attendees and 2020 Survey Participants

Emerging Risk Rank Conference Attendees Survey Participants
1 Climate change Climate change
2 Cyber/networks Cyber/networks
3 Pandemics/infectious disease Pandemics/infectious disease
4 Demographic shifts (tie)

Disruptive technology (tie)

Disruptive technology
5 Financial volatility

Figure 2: Global Economic Outlook for 2021—Conference Attendees and Survey Participants

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Figure 3: Emerging Risks by Category—Conference Attendees and Survey Participants

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IFRS 17 Implementation

During one of the IFRS 17 presentations, “Mythbusters IFRS 17: Perception Versus Reality,” the attendees, most of whom were from Taiwan (59.42 percent) and Hong Kong (21.74 percent), were surveyed on a number of topics. Of particular interest was that the majority of the respondents are working in departments directly affected by IFRS 17 and have extensive knowledge of the details of IFRS 17 (see Figure 4). It was also interesting that the majority of the respondents are in the midst of the core implementation task of software and actuarial system development, as shown in Figure 5.

Figure 4: Departments in Which Session Attendees Work

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Figure 5: Stage of IFRS 17 Development/Implementation Among Session Attendees

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A key takeaway and concern, as shown in Figure 6, was how long session attendees think it will take to implement IFRS 17. The majority felt that it will take more than 36 months to implement, which is a problem as IFRS 17 will be live in less than 36 months in most countries! This points to the numerous technical challenges insurers face in the implementation process.

Figure 6: IFRS 17 Implementation Timeline

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Are external resources needed to implement IFRS 17? If so, what resources? Session attendees said they need actuarial expertise the most when it comes to implementing IFRS 17. However, other external resources—such as IT, finance experts and project management expertise—were also considered essential, although project management was the role respondents felt the most comfortable handling internally.

While respondents overwhelmingly agreed outside assistance is needed to implement IFRS 17, they also felt that an insurer cannot simply receive the final IFRS 17 system without performing any work to help with the implementation. The feeling was that, on average, only 50 percent of the IFRS 17 work can be outsourced.

One particular source of confusion has been whether there is a connection between solvency and IFRS 17. For instance, as queried in Figure 7, is there any relationship between IFRS 17 being implemented and the potential need for capital injections? Thirteen percent of session attendees felt that there was no relationship, but in reality, due to the establishment of contractual service margins (CSMs), injections could be required. The bottom line: Most were unsure if there was a connection and responded “maybe.”

Figure 7: If an Insurance Company Is Solvent, Will There Be a Need for Injection of Capital Due to IFRS 17?

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An issue that was brought up in several of the IFRS 17 presentations during the symposium was ways in which an insurer can go beyond simply complying with IFRS 17 to improve technical capabilities using the information from IFRS 17. Enhanced experience analysis capability and more granular product development were the most popular ways to go about this, but there were also other ideas, including monitoring distribution channels.

As the role of the valuation actuary changes due to IFRS 17, session attendees felt that due to the greatly enhanced disclosures, the work of the actuary will be open for the world to see. There were also concerns that there will be significantly more interactions with the external auditor under IFRS 17, and speed will be much more critical.

Moving on From the Pandemic

Another interesting symposium session was from Bryce Shepherd: “Post-Pandemic: Where to From Here? An Exploration of Living Benefits, Digitalization and Partnership.” During his talk, Shepherd mentioned the physical and mental health impacts of COVID-19. There are four waves: The first three are on the immediate mortality and morbidity of COVID-19, the impact of resource restrictions on non-COVID-19 conditions and the interrupted care of chronic conditions. The fourth wave, however, is perhaps less discussed but likely to be equally or more severe than the others: It is psychic trauma, mental illness, economic injury and burnout. Shepherd also shared COVID-19 has increased interest in living benefit insurance, meaning any insurance that provides a payout while the policyholders are alive.

The symposium concluded with two final sessions. The first was by Alex Leung and George Kesselman on the evolution of InsurTech in Asia. The second was by Gavin R. Maistry and Tushar Chatterjee, entitled “Whether Through Turmoil—Application of Economic Capital Model.”

Hassan Scott Odierno is a partner with Actuarial Partners Consulting.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.

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