I think we have to accept that with the I-17 there will continue to be more volatility in the results, but the reasons for that volatility could vary quite a lot between different types of companies and different types of business. So managing that variety and that volatility and communicating well will be really key for me in terms of insurers moving forward. You're listening to rethinking insurance, a podcast series from WTW where we discuss the issues facing P and C, life and composite insurers around the globe as well as exploring the latest tools, techniques and innovations that will help you rethink insurance. Welcome to our rethinking insurance podcast. I'm your host Cameron Froogie and I'm delighted to be joined today by my guests Theresa Murphy and Irving Nagtha. Welcome both and thank you for joining me. Hi Cameron, lovely to see you again. Thank you for having me Cameron. You're very welcome. Great to see you both. This is a first of a two-part podcast series focusing on I-17. And for those of you not close to it, I-17 is a new global accounting standard for insurance business, applying to insurance companies that is applicable in most of the world now that came into effect in most of the world in 2023. And we had the first set of year-end 2023 full-year publications under our for-17 just being published in February, March and April this year. And in this episode will be exploring the key findings from our analysis of these disclosures that was finalised round about end May. There is a two-part series on our for-17 and our next one will be focusing on our analyst survey, their own views of I-17, the main users, and we completed that survey end June. Just for a bit of background, our insurance consulting technology business at WTW has worked with a lot of insurers over the years helping them implement I-17 close to 200 insurers globally. And over 18 insurers have bought I-17 technology to help them deliver I-17 results. I am our global I-17 advisory leader having oversight on our consulting work around the world. We support insurance consulting technology and outsourcing around I-17. And just by a bit more background of our guests today, Theresa is our UK I-17 advisory lead and Ervy has been supporting our global advisory group for a number of years now, leading this and previous disclosure analysis work with the team. And thank you both for coming. Ervy, I might turn to you first leading the day to day analysis of our disclosures. Can you describe what we did, why we did it and how did you and your team go about it? Or the disclosures analysis, we analyzed the publications of 89 insurers and reinsurers around the world covering both the life and non-life industries. These insurers we covered are headquartered in 21 countries across all major continents and included 34 large multinationals, primarily headquartered in Europe but also Asia Pacific and Canada. We were particularly interested in analysing the year-end 2023 publications as these were many insurers first year-end I-17 disclosures. The aim of our analysis was to understand and analyse the key I-17 information that was being published for the first time. I was leading a team of graduates and junior analysts to perform this exercise who were mainly based across UK and India. Thank you very much Ervy and I just like to take the opportunity to thank the whole team who worked with you on this and it's great that we've now got a team who are well versed in insurance publications and annual reports and I-17 disclosures, familiar with their terminology and interpreting the results. Very interesting. What was your experience of actually being involved with this exercise? I found this exercise very interesting because I was able to understand the various approaches used by global insurers when adopting I-17. It also felt a little bit like we're a part of history. We're seeing the first ever set of annual I-17 disclosures. I will say it was slightly difficult to gather all the data because different insurers published the key information at different times. For example, we had many insurers who did not publish analysis of movement or sensitivities in their preliminary disclosures and chose to show this detail in their annual reports which were published several weeks later. Also, as the key information was showed in different places, it made it slightly more challenging to find at times. Overall, this experience has been very insightful and I'm looking forward to see how the disclosures change over time and with I-17 being adopted in more countries. Thank you very much, Joby and I'm asked about echo those thoughts. Personally, I've been involved in some aspects of the I-17 project for almost the last 25 years, so absolutely get your point about history being made and actually good to see this turn from theory to practice. I found the point you made and your team's observations around key information only being available much later, really interesting. I've known for many years how important sensitivities in analysis move and are to interpreting numbers. The fact that these are now only out several weeks later for many companies makes it harder to compare and contrast the sector from the results later in the reporting cycle. Just to see how that develops. To easy, you had the role of overseeing the project and provided ongoing review and obviously very well versed in I-17 implementations and results analysis generally. What would you say are the two or three most interesting or surprising aspects of this exercise for you? Yeah, thanks. It's a really been in really interesting analysis and as you said, Cameron, the team have done really well. For me, notably, there was a material variation in the KPI's and growth metrics being used. You really have to read the definitions really carefully. Are they including the CSM in the adjusted equity or not? This has made it really hard for users of accounts, first in terms of comparison and developing understanding of the results and what to do with them. I know in the analysis that Irving the team put together, they noted five different new business KPI's just being used upon the multinational, so a big variation there. I think one of the interesting things as well is, and I know I-17 has been really painful with people and there's been a lot of work and there is a lot of disclosure. I think the feeling is there's probably still more disclosure that might be needed and so there's not quite enough yet and I think it's in different places. More on the sensitivities would be quite useful because I think there's some unusual results there. More with reconcilations to other key metrics for capital or embedded value. They are there for some, not for others and for those who are doing them that there's quite different variations in how they're sharing them. An interesting enough areas where you've got run off of the new business CSM and run off of the risk adjustment and not really mentioned at all in the disclosure, so I think there is still a need to go a bit further and more granular information that could be provided to be helpful. I think again another interesting point is since the transition date, the RF-17 equity and profits have looked better, typically driven by better market performance, then when we looked at them in 2023 rather than 2022, but it's quite varied when you look at different companies and different regions. I think we have to accept that the RF-17 there will continue to be more volatility in the results, but the reasons for that volatility could vary quite a lot between different types of companies and different types of business. So managing that variety and that volatility and communicating well will be really key for me in terms of insurers moving forward, particularly for some where they're not really viewing that as their key business metric. Yeah, thank you, Thruis. It's very interesting and that reminds me that part of our activity in our sort of global advisory group of last few years is to conduct some very deep dive surveys of insurers on their implementation programs. In fact, we were getting numbers of close to 300 insurers globally taking part, so extraordinary insight into how programs went. I remember that the last one we did, which I think we finalized September last year, 2023, we had an estimate that cumulative costs of implementation across the sector was over $20 billion. So roughly I think about $20 billion has been spent.
so far globally on implementing Office of the Equalic Strawling Number. So in that context and what you just said, it's some quite interesting observations that there's still more work to be done than the areas of clarity and disclosure and explaining the results. So it's still more work to be done. Quite interesting as well. You touched on right at the end, the limited business impact and certainly seen quite a few insurers making very clear that IFR 17 to date has had very limited impact on key business decisions or dividend paying capacity or things like that. They have clearly been positive. I mean, the fact that the life industry is now disclosing runoff of contractual service margins and the non-life insurers using the relevant measurement models. And I know the analysts have got some sort of mixed views on life versus non-life, which will come to this next podcast. But what do you think that means in terms of insurance next steps to ease what do you think insurers should be doing going forwards? I think some really great points there and I think there is a lot of useful information in those reporting accounts. And so perhaps another one is to actually listen to the feedback from the analysts. I know we will have more on this, but more insightful and consistent communication and more reconciliation and sensitivity. So the user, the accounts understand it and know what to do with it. And I think from a business perspective, using IFR 17 for more than just a compliance exercise, you know, I think people can, once they get through rid of the operational side, think about really the meaningful analysis and forecasting they can do for their business, how they link all their metrics together. And that really supports the internal understanding and once you get that, you get better market communications as well. Yeah, that's a really good point to research, because we all know that insurers use a range of metrics, some IFR-related, equity, profit type metrics, but also many non- IFR-related helping the user explain those links and recommendations, I think, be really valuable. Thank you. Maybe if we have one parting thought from each of you today, given all the work we've done with insurers, given our implementation survey, given early the detailed disclosure analysis that you and your team performed over recent months. And if there's like one suggestion for insurers going forwards with regard to IFR-17 implementation and application, you know, what would that be? Maybe if you start with you, Irvie, and then move to Theresa. I would say coming from the perspective of reading the publications, we saw some insurers who are publishing their disclosures in a "user-friendly format" where they had sections dedicated to covering the key IFR-17 information. It would be good to see more insurers choosing to adopt a similar format and sort of learning from industry best practice. Yeah, I agree with that, Irvie. I've certainly seen the odd sort of large multinational see-through-of-form group that's had very clear standalone, financial sort of supplements where they have all the key information on place. So that's a good authorization. Theresa, what do you think insurers should be doing? I think for me, if I think about the different regions, because they're in quite different positions, I think sort of probably within a mere, I think the short term, I would be asking or suggesting people focus on making IFR-17 BAU more manageable and efficient. And once you've got that, that's allowing you time to utilise the extra insights that IFR-17 can provide and focus actually in just on running your business in the best way you can. The Asia-Pacific, who are probably in the midst still have actually going through implementation, it's really to try and learn from all the mistakes and all those things that we did within the UK and the MIR to actually take those learnings and actually include your implementation process and have us move the running to BAU. Thank you very much, Theresa, Irvie, for your answers and for joining me today. It's great to hear your thoughts. And to all our listeners, thanks for joining us. Just a reminder, if you work for an insurance company which to discuss any of this content in more depth with any of our IFR-17 experts, including the three of us, please do get in touch with your usual WTW consultant or email
[email protected]. And don't forget all of IFR-17 published materials are on our website. So if you wish to visit that, please go to www.wwwco.com/ifrur17. And if you enjoyed this episode, do subscribe to hear future episodes and you'll get a nice reminder about our second IFR-S-focused episode coming out soon, where we'll be exploring the key findings from our very recent analyst survey. Thank you very much. Thank you for joining us for this WTW podcast featuring the latest perspectives on the intersection of people, capital, and risk. For more information, visit the Insights section of WTWCO.com. This podcast is for general discussion and/or information only, is not intended to be relied upon, an action based on or in connection with anything contained herein should not be taken without first obtaining specific advice from a suitably qualified professional.
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