The deadline for IFRS17 is drawing near, and insurers are not only grappling with workforce issues but also balancing remote work with schedule demands. Implementation of this new accounting standard has been a massive undertaking for insurers across the globe, and Singapore is no exception. We spoke to the Singapore Actuarial Society about the pace of implementation.
Singapore has a broad range of insurers; from multinationals that are implementing IFRS17 centrally and rolling out to their entities, to local insurers that are carrying out of IFRS17 implementation locally. While the level of preparedness varies, the Singapore Actuarial Society (SAS) is not aware of any potential delays to the timeline.
The go-live date for IFRS17 will be 1 January 2023 and local accounting standards will change at the same time. The SAS noted that companies can vary in terms of when they first disclose the results to the public.
“We are unable to comment further on the readiness of insurers as our focus is more to discuss aspects of the standard and its interpretation for the Singapore insurance industry,” said the SAS.
For general insurers, especially those writing short-term business (less than one year duration) the simplified premium allocation approach (PAA) method has made implementation somewhat easier, it said. “However, we see insurers struggle with operationalising IFRS17 due to requirements on reporting that require a greater set of calculations requiring more data while running alongside existing finance and actuarial processes.”
For life insurers, the implementation is complex. IFRS17 calls for market-consistent valuation of options and guarantees, which in most cases would require the introduction of stochastic modelling for participating and universal life contracts. This can be a significant challenge on its own, even without having to do this as part of the implementation.
Another challenge is the preparation of the opening balance sheet, which requires a fully retrospective approach where practicable. This can mean having to run IFRS17 not just from 1 January 2023, but for years before that.
Issues to look out for
According to a survey done by EY, the biggest lesson learned throughout the implementation process is that organisations will not know how IFRS17 will work until the first time that they produce the numbers.
Insurers that have done dry runs have been very surprised that the numbers produced do not always make sense.
“Some of the larger life insurance companies have found that it is only when they get to the third dry run that they start to understand the numbers being produced. It is critical to make sure that the IFRS17 numbers are stabilised as soon as possible. Companies may find this challenging because the implementation has taken longer than planned, but further delay may cause more issues later,” said an EY report.
EY also noted that the produced numbers will still need to be audited, which will take additional time and resources. It is likely that by the end of 2022, companies will start releasing information to the market regarding the expected impact on the effective go-live date, followed by information on opening balance sheets and comparative numbers under IFRS17 in Q1 2023.
“Companies need to focus on ensuring there is enough time to produce and understand this information and for the numbers to be audited before publication,” it said.
Maintaining IFRS17 with previous standards
The current RBC2 basis of reporting solvency will still need to be maintained, and companies will continue to produce both sets of numbers (IFRS17 and RBC2) and reporting on both bases. The current RBC2 basis, which is broadly aligned to IFRS4/FRS4 in Singapore, will continue to be the basis used for statutory accounts.
The SAS has set up working parties on IFRS17 which members can join to discuss aspects of the standard and its interpretation for the Singapore insurance industry. The working party has published papers that actuaries operating in Singapore can refer to, such as discussion papers on IFRS17 Singapore implementation by the SAS Life Insurance Committee working party which are available on SAS’ website.
“While these papers are not binding on our members, it serves as a useful starting point on how local life actuaries think about the different aspects of IFRS17 in Singapore,” it said.
There have also been periodic inputs provided to the Institute of Singapore Chartered Accountants (ISCA) on IFRS17 actuarial topics.
How IFRS17 has affected recruitment
Consultants from recruitment agency Randstad Singapore’s insurance specialist recruitment team shared some of their observations and predictions in workforce and talent trends in the insurance industry in Singapore this coming year.
“We have observed active talent movements within the actuarial space, with many professionals moving on to work on new projects or to assume new job responsibilities as an opportunity to further deepen their capabilities and upskill themselves,” an article on its website said.
There has been a rise in demand for new talent; specifically for actuarial managers, to facilitate IFRS17 implementation and reporting. Insurance companies in Singapore have also been building the capabilities of their actuary teams to support new and existing product development and pricing models.
As the implementation deadline approaches, actuarial managers will need to collaborate with vendors, actuary project teams and finance teams to fill the gaps in user acceptance testing. As a result, many insurers are hiring for replacement roles as well as new permanent and contract talent to facilitate IFRS17 implementation and post-implementation maintenance, said Randstad. A