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© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
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© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
fi...
© 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member
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Insurance accounting - Changes on the horizon for general insurers

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Accounting for insurance contracts is changing. If your company issues general (non-life) insurance contracts, it’s time to prepare for the impacts on your business.

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Insurance accounting - Changes on the horizon for general insurers

  1. 1. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Insurance accounting Changes on the horizon for accounting for general insurance contracts July 2016 kpmg.com/ifrs
  2. 2. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “The new IFRS insurance contracts standard will be published soon. Now is the time for entities to begin assessing the impact the standard will have on their key performance indicators and processes.” Insurance–Accountingchangesarecoming Joachim Kölschbach, KPMG’s global IFRS insurance leader 2
  3. 3. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. It’stimetostartassessingtheimpact 3 insurance or reinsurance contracts The coming changes impact companies’ accounting if they issue… any contracts defined as such by the standard or
  4. 4. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Thecomingchangeswillaffect... Volatility in your financial results 4 Capital management Your people Broad business decisions Systems and processes Operational performance and measurement
  5. 5. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Keyfeatures
  6. 6. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Anew,comprehensiveaccountingmodel 6 It’s based on the fulfilment objective, and uses current assumptions and discount rates
  7. 7. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Generalmeasurementmodel 7 Estimates of future cash flows Discounting to reflect the time value of money Contractual service margin (CSM) Profit to be recognised over life of the contract Risk adjustment Four building blocks
  8. 8. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Premiumallocationapproach(PAA) 8 Optional for certain short-duration contracts A proxy for the building block approach Similar to current practice for non-life contracts Discounting of claim provisions required unless practical expedients are applied
  9. 9. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. SubsequentmeasurementofthePAA 9 Adjust the carrying amount for changes to current market discount rates for incurred claims Recognise revenue on the basis of passage of time… If the expected risk pattern differs from this, the expected timing of incurred claims and benefits or…
  10. 10. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Transition 10 Practical expedients and fair value approach available for determining CSM and discount rates Limited ability to redesignate some financial assets on initial application ! Change ahead Full retrospective application is required Restate comparative information
  11. 11. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Presentationanddisclosures 11 Investment components excluded from insurance revenue Entities can choose to present effect of discount rates changes in OCI or in P&L to reduce volatility Multiple new disclosures add complexity
  12. 12. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Mandatoryeffectivedate 12 AlternativeEarliest possible Expected to be at least three years between the date the final standard is issued and the mandatory effective date or
  13. 13. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Determiningthe impact
  14. 14. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Volatilityinyourfinancialresults 14 Volatility may result from the use of current market discount rates that are not linked to an insurer’s investment portfolio
  15. 15. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Operationalperformancemeasurement 15 Level of aggregation may reduce comparability Transparency about expected profitability of contracts in force
  16. 16. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Broadbusinessdecisions 16 Measurement and scoping criteria may require changes to product profiles, features or pricing New reporting basis may have tax implications in some jurisdictions
  17. 17. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Capitalmanagement 17 Possible significant change in capital amount at transition The reflection of current market rates may result in greater interest in asset-liability management
  18. 18. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Systems,processes,andcontrols 18 Changes may be needed to develop, test and implement processes and controls Transition may require early planning and parallel runs Systems and actuarial models may need upgrading
  19. 19. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Yourpeople 19 Compensation arrangements and performance targets may need to change Additional resources and interaction with actuaries may be needed to manage transition and reporting processes A co-ordinated response within the organisation is essential
  20. 20. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Nextsteps
  21. 21. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Accounting,taxandreporting 21 Review your contracts Plan your accounting policy decisions Assess possible alignment with solvency and regulatory reporting Identify impact on capital positions and volatility sources Consider benchmarking against peers
  22. 22. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Processes 22 Evaluate contract classification Identify processes affected and establish new processes to… Calculate the measurement and release of insurance contract liabilities
  23. 23. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Systems 23 Accounting systems and internal controls Actuarial modelling capabilities Upgrade systems to ensure that they can handle new requirements… Valuation and financial reporting systems
  24. 24. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Yourbusiness 24 Review product profiles and consider changes to product design and pricing Revisit investment allocations and asset-liability management Evaluate existing reinsurance programmes for their impact on results Assess impacts on key performance metrics
  25. 25. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Peopleandchange 25 Determine staff needs Train finance, actuarial, and other relevant teams Evaluate impact on compensation arrangements Communicate performance and metric changes to stakeholders Assess the impact of changes to processes
  26. 26. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMGcanhelpyou 26 Assess the impacts Design the right solution Implement a future state Accounting diagnostics Process and information gap analysis Financial impact assessments Data requirements
  27. 27. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Nextsteps Speak to your usual KPMG contact Think about your implementation plan Find out more at kpmg.com/ifrs 27
  28. 28. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG IFRG Limited, a UK company limited by guarantee and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. kpmg.com/appkpmg.com/socialmedia

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