what are fis doing to support insurers implement ifrs 17? · 18.04.2018 · external components/...

What are FIS doing to support insurers implement IFRS 17?

Martin Sarjeant, Head of Risk Solutions Management and Strategy

17 April 2018

Confidentiality Statement

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or implied, in this document. In no event shall FIS be liable for damages of any kind arising out of the use of this document

or the information contained within it.

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accepting this document you agree that:

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protect this information and not to reproduce, copy, disclose to any third party or use the information in any way without

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provision, then FIS shall be entitled to take legal action against you.

Unless stated otherwise or the context otherwise requires, all references to “FIS,” “we,” the “Company” are to

Fidelity National Information Services, Inc., a Georgia corporation, and its subsidiaries.

IFRS 17

http://empower1.fisglobal.com/ifrs17.html https://www.linkedin.com/groups/12013582

http://empower1.fisglobal.com/ifrs17.html

https://www.linkedin.com/groups/12013582

Collaboration around IFRS17 with SAP and Deloitte

To be the single port of call for insurance actuaries andrisk managers for end to end solutions to all their risk management needs and providing….

an environment in which actuaries have the power

and freedom to create and run sophisticated models.

executives, senior managers and regulators with

the confidence that the data they receive is correct,

tested, and up to date.

reduction in the cost and time to deliver the required

information to the business

Insurance Risk Management Solution Vision

INSURANCE PROPHET

END TO END RISK

MANAGEMENT AND MODELLING

Key themes

Insurance risk management

Enterprise risk management

Regulatory coverage

Business focused delivery

FIS' Prophet suite offers a compelling end-to-end solution to support IFRS17 requirements

8

PRODUCTION POST-PRODUCTION

Components of Prophet suite integrate with most known IT platforms, across a variety of deployment models

Prophet

Control Centre

• Automates Prophet jobs• Maintains process audit trail• Manages data transfer between stages• Enhances data lineage and traceability

Business intelligence and regulatory reporting

Additional data; finance,

etc

Reporting and

dashboards

File input to DCS for model

to model

Corporate data warehouse

External systems

Insurance Data Repository

• Maps results to business context

• Provides standard reporting schema

• Supports BI dashboards• Supports external

data load

Prophet Results Database

• Collates results• Holds metadata from model

runs• Converts data to SQL format

PRE-PRODUCTION

Prophet Professional

• Model

development

• Promotes model

to production

• Standard IFRS

17 calculations

supported,

transition and

disclosure

requirements

Data Sources:Policy, Finance, etc.

Prophet Enterprise

• Executes runs

using PP models

• Produces

consistent and

auditable results

• Maintains execution

history

Prophet Modules:Assumption

Manager

Prophet suite components

External components/sources

Prophet Modules:Glean

Data Conversion System

Managed Cloud Services

On premise installation

FIS IFRS 17 solution

FIS Prophet models provide

the building blocks for the

Fulfilment Cash Flows

New Prophet IFRS 17 Group

Calculations Library

performs the calculations

required for both reporting

and forecasting applications

Suite of Prophet governance

tools cover process

automation, assumptions

management, data handling

and production of results

Calculation of

Fulfilment Cash Flows

Calculations of the CSM

and Income Statement

components

Governance and

connectivity with

financial systems

Scope of Library Updates

Conventional

Unit-Linked

Permanent

Health

Insurance

Asset

Liability

Strategy

IFRS 17

Group

Calculations

GI Reserving

GI Capital

Modelling

Long Term

Contracts

Short Term

Contracts

Individual Policy CalculationsGroup Calculations

BUZ

International

Deutsche

Advantages of using the IFRS 17 Group Calculations library

Single

Platform

IFRS 17 calculations sit alongside and leverage any existing Prophet models

Support provided for both reporting and forecasting applications

Cost effective due to re-use of existing infrastructure

Diagram view for tracking and understanding of calculations

Open interface for making code changes e.g. to reflect differences in methodology

Inspect IFRS 17 results before transferring to finance

Available now

Included as part of support charges

Ongoing library and system updates to support customer needs

Helpdesk and Professional Services support on request

Use of

Prophet

Features

Availability

and Support

Roadmap update

Roadmap New Naming conventions for future releases

• Aim across FIS is to get releases aligned and to bring in a standardised release cadence

• To get a clear and consistent naming convention for releases

• General theme for releases is moving over to a calendar date format for release, this will give more transparency over

the releases

• Will bring into line the various Prophet suite releases under a consistent naming convention

• Release format for all 2018+ releases will be [Product Name] QQ YYYY

• These will be used for in all FIS communication going forward

• For clarity and comparison with the old roadmap, the upcoming (Q2 2018) Prophet releases were versioned as 9.0.5

they will now be known as Prophet Professional Q2 2018 and Prophet Enterprise Q2 2018 respectively

This document contains the Prophet suite roadmap which is intended to inform our customers of up and coming developments of Prophet products and subsequent approximate delivery timeframes. This

document contains forward–looking statements based on FIS’ current expectations, forecasts and assumptions. Forward-looking statements are subject to risks and uncertainties associated with FIS’

business that could cause actual results to vary materially from those stated or implied. The roadmap will be continually updated as more information becomes available.

Prophet Suite Roadmap – Data , Systems and ProcessFocus on IFRS 17

14

Data

Sys

tem

sP

roc

es

s

2018

April JuneMay SeptJuly OctAug Nov Dec Jan AprilFeb MayMarch June

2019

Insurance Data Repository Q4 2018

Prophet Control Centre Q3 2018

Prophet Professional Q2 2018

Prophet Enterprise Q2 2018

Glean Q2 2018

Prophet Results Database

Q3 2018

Flexible Results Q4 2018



Prophet Bulk Interface Q4 2018

Flexible Results Q2 2019






Roadmap in Detail – DataD

ata

• Optional add on module to

Prophet Enterprise

• Allows results to be written to

a distributed database instead

of standard file system

• Highly performant when

writing large numbers of small

or large number of files

• Performance improvements

both of read and write

• Faster uploads to Insurance

Data Repository

• The Prophet Results

Database contents will be

replaced by a high speed bulk

access interface, providing

on-demand access.

• Access will be provided

through ODBC, meaning that

Excel and other tools can

access data held within

Flexible results

• The Insurance Data

Repository will continue to

operate unaffected, although

overall end to end data

transfer times will be reduced

2018: Q4

Flexible Results

NEW MODULE

2018: Q4

Prophet Bulk Interface

NEW MODULE

• Additional data mapping

capability from Assumptions

Manager and Prophet

Enterprise

• Post-Prophet adjustments

(additive and scalar)

• Performance and automation

enhancements

• Support for Flexible Results

developments

• Fixes and enhancements

based on customer feedback

2018: Q4


Prophet

Calculation

Engine

DDBMS

MP

Results

(RPT)

Binary

Files (.prj,

.sto etc.)

Meta-data

(XML)

Prophet

Calculation

Engine

DDBMS

Proprietar

y binary

objects

with fixed

indexes

Prophet

Calculation

Engine

DDBMS

Proprietar

y binary

objects

with user-

defined

indexes

SQL Server

PRD (R2DB)

Parallel load

and filter

PRD

Transient Data

Store

(Copy 1)

IDR

Persistent with

context for BI

(Copy 2)

IDR ETL

Parallel load

and mapping

SQL Server

PBI (Prophet

Bulk Interface)

on-demand

transfger

IDR

Persistent

with context

for BI

(Copy 1)

IDR ETL

Parallel load

and mapping

SQL Server

PBI (Prophet Bulk

Interface) on-

demand transfger

IDR

Persistent

with context

for BI

(Copy 1)

IDR ETL

Parallel load

and mapping

DDBMS

IDR DD

Persistent

with context

for BI (Copy

1)

IDR ETL

Parallel load

and mapping




Roadmap in Detail – SystemS

yste

m

• Backward regression

• Added trigonometric

functions to the function

wizard

• New schema system to

Glean

• Improved the general

navigational

responsiveness of the

interface.

• Many other enhancements,

fixes and usability

improvements based on

customer feedback

2018 Q2

Glean

• New licensing

• User defined functions

• Enhancements to nested

structures

• Assumptions manager and

table manager enhancements

• Prophet backup and restore

enhancements

• Glean enhancements:

2018 Q2

Prophet Professional2018 Q2

Prophet Enterprise

• Enhancements to Assumptions

Manager and Table Manager.

• Enhancements to Nested

Structures

• Improved promote: Promotion

now does not use the PE Studio

client. This means that a

promote can be set off, and

Studio closed, without affecting

the promotion action

• Preview Prophet Enterprise

Restore: Prophet Enterprise

objects can be previewed before

commencing the restore.




2018 Q2 – Prophet ProfessionalS

yste

m

• Extension of Prophet language to simplify the actuarial code

• Avoid duplication and enforce consistency in the calculations

• Support for:

• 9 inputs and 1 output, including array support to 4 dimensions

• Up to 250 lines of code per function

• Multiple calls from both extended and normal formulas

• Array handling using new functions for upper and lower bounds

• Library support planned for 2019 to enhance usability and performance of

ALM models

User defined functions

• Save point compare:

• Compare model point and table information generated in a nested

structures run

• Compare the data from two nested points, in the same or different

save points

• Track changes in intermediate dynamic periods

• GUI enhancements:

• Re-order and sort values in model point and table maps

• Improvements to copy and paste within table maps

Nested Structures

• Chose what to back up and what to restore

• E.g. back up all files but restore only a subset

• Log who created the back up, when and in what version of Prophet

Back up and restore




2018 Q2 – Prophet EnterpriseS

yste

m

• Report generation:

• Option to generate assumption reports, tables or both

• Base set runs:

• Perform runs using just base sets

• Act as a repository for tables as well as assumptions

• Parameterised reporting dates

• Set reporting date as a parameter

• Users with submit, but not edit, permissions can submit jobs on

different dates

Assumptions Manager

• Promote entities from one PE environment to another on the server side:

• Begin a promote operation without the need to leave PE studio open

• Work within PE without the Promote panel remaining open

• Before restoring a back up, inspect which entities are going to be restored

• Using the API, select which compartments to upload a workspace to instead

of using the default

• Security improvements:

• Credentials no longer stored on the client

• Removal of user profiles from Studio options

• https connections enforced

Other enhancements

• Constrained index variables in production tables

• For US customers, plan code tables which have several constraints

in index variables, can be grouped and filtered using understandable

terminology

Production Interface (US)




2018 Q2 – GleanS

yste

m

• Determine relevant risk factors faster:

• Support for backward regression

• Iterate over different generalized linear models and hone in on relevant risk factors

• Specify the model and perform a series of iterations, excluding each risk factor in

turn

• F-statistics to determine whether eliminated factors are statistically significant

• New schema system to Glean.

• From this version you will not be able to open Glean workspaces in older versions

once they’ve been upgraded

• Improved the general navigational responsiveness of the interface.

• Improved the navigation tree to be more responsive, and expand in a more consistent

way

• Fixes and improvements

• Error where Glean formulas were not processed correctly

• Updating hierarchy after rescanning data source now works as expected.

• Y-axis label on charts now displays the correct name of the variable being

charted

• Expanders now don’t reset whenever you change which model you’re looking

at.

• Row summary in grids of values now stays on the screen for large tables.

• Improvements to view manager

• Various exceptions and unexpected errors are now caught and processed

properly by the system

• A bug preventing slicing a cube into a four-factor table has been fixed

• Miscellaneous other improvements

Enhanced model selection




2018 Q2 – New LicensingS

yste

m

• Developed by FIS instead of reliance on a third party leading to simpler

installation and better licensing control

• Updates to the existing licensing software have been complex for some

clients

• Replacing licences when users' PCs were rebuilt, replaced or failed was

a problem for clients

• Addresses negative client feedback we’ve received on the existing

licensing

• Allows us to better support virtualised environments

• Far better auditability for clients with new admin console allowing

customers to see who has licences

• Licence is tied to the user rather than the machine removing the need for

c2v /v2c files

• In future releases will allow us to better match licensing with usage (for

Prophet Enterprise customers who want to effectively license more cores

for short periods)

Benefits

• Tied to an individual user’s Active Directory account such that only the

Prophet user with the email address specified on the licence can acquire it

(similar to today’s Machine-Locked Licence).

• Machine Locked licences will be transferred, “one for one” into User

Licences – using the client names of the owner of that machine

Named User Licences

• Can be used by multiple users (from a defined list) within an Active

Directory group, as controlled by their email addresses, and selected by the

client (similar to today’s Floating Licence). This can be used by any

machine linked the client server.

• Floating Licences will be transferred “one for one” into Group Licences –

the client names the team that uses the licence

Group Licences

Important dates

The older licensing in general use will continue to work but the Prophet Helpdesk’s ability to offer support will be diminished after a certain date. FIS will no

longer be able to create, update or replace any of the old licences from 31 December 2020 (31 March 2021 if retired version support agreement exists).

This includes the inability to create Disaster Recovery (DR) licence keys or to use updated versions of the Solutions Installer.




Pro

cess

• Disaggregation of non-Prophet

adjustments

• Loading of t-dept CSV files

• Option to omit zero-records

• Large-array performance

• Additional AM data mapping

capability

• Support for flexible results

format

• Customer feedback, fixes and

enhancements

• ** Exact content being planned

currently based on

implementation feedback

• Integration with IPP 10

• Data exchange using AMIF

• New connectors for archiving

and cloud operation

2018: H2

Flexible Results

2018: Q4

Prophet Bulk Interface

• Improved and extended user

interface to include grids, and

better links between fields.

• Extensions to the drop-down

lists and services to better

handle errors and blank

values

• Better load sharing between

different services to speed up

user interface

• Better queuing of requests to

Prophet components to better

handle performance under

load.

• Disaggregation of non-Prophet

adjustments

• Loading of t-dept CSV files

• Option to omit zero-records

• Large-array performance

• Additional AM data mapping

capability

• Support for flexible results

format

• Customer feedback, fixes and

enhancements

• ** Exact content being planned

currently based on

implementation feedback

2018 Q3

Prophet Control Centre

2018: Q4


Roadmap in Detail – Process




Prophet Suite Roadmap – Calculations, Speed and GovernanceFocus on IFRS 17

Calc

ula

tio

ns

Sp

ee

dG

ove

rna

nc

e

2018

April JuneMay SeptJuly OctAug Nov Dec Jan AprilFeb MayMarch June

2019

GPU Module Q4 2018

AVX Module Q4 2018

Collaboration Manager Q2 2019

Assumption Manager Q2 2018

GPU Module Q2 2019

AVX Module Q2 2019

US 360 Library – Regular updates

Asset Liability Strategy and Proxy Fitting Q2 2018

US Projections Q2 2018

IFRS 17, Life and Health updates Q2 and Q4 2018




• Further PBR enhancements

• Zero cap on post level term

profits

• Run-time improvements

• Additional US GAAP support

• FAS91 support for payout

annuities and structured

settlements

• Addition of EIUL GAAP

reserves

• Addition of FAS157

calculations for VA GMIB

SOP03-1 calculations for

GMWB riders

• Ease of use in the US 360

library

• Improved and more complex

example products

• FIS maintained US Valuation

code in locked down Prophet

Book

• Encompasses US Statutory,

Tax, and GAAP regulations

• Updates to US Valuation Book

as often as monthly to keep

up-to-date

• Clients can import US

Valuation Book without

impacting their product setup

• Vendor regression testing of

client models

• IFRS 17 :

• Updates for ALM models

• Reinsurance CSM

treatment

• Projected crediting rate

method

• GI Updates

• Customer feedback

• Enhancements to setting of

investment strategies in ALS:

• Duration targeting

• Hedging of greeks

• Target gains

• Apply strategies at different

levels of granularity

• Proxy fitting enhancements

• Further IFRS 17

enhancements including topics

of reinsurance and

mutualisation

• Customer requests and

targeted improvements to

assist with IFRS 17

engagements

• Modules support for IFRS 17

and SII style applications

• Repeatable

calculations per model

point e.g. sensitivities

and multiple bases

• Capital requirements

and cost

• German Health ALM updates

Roadmap in Detail - Calculations

2018: Q2

IFRS 17 updates

ALM and Capital

2018: Q4

IFRS 17 liability and Group

calculations

Calc

ula

tio

ns

2018: Q2

US Life and AnnuityRegular updates

US 360 Library




• Enables Prophet Enterprise to

access GPU compute and

GPU cards and run specific

calculations on GPUs


will be model dependent and

certain types of models will be

more suitable for vectorization

• It is planned that this module

will also include load balancing

between GPU and CPU to give

customers best balance of

performance

• New module available as an

extension to Prophet

Enterprise

• Enables Prophet Enterprise to

efficiently take advantage of

AVX on Intel chipsets


will be model dependent and

certain types of models will be

more suitable for vectorization

• Allows more effective use of

existing hardware where that

hardware includes AVX

technology

• New module available as an

extension to Prophet

Enterprise

• Optional add on module to

Prophet Enterprise

• Allows results to be written to a

distributed database instead of

standard file system

• Highly performant when writing

large numbers of small or large

number of files


both of read and write

• Faster uploads to Insurance

Data Repository

• Will provide APIs to access the

results

• Further updates to AVX and

GPUs

• Incorporation of client

feedback

• Extension to wider models and

applications

• Further working with partners

and clients

Roadmap in Detail - Speed

Q4 2018

GPU

NEW MODULE

Q4 2018

AVX

NEW MODULE

Q4 2018

Flexible Results

NEW MODULE

Q2 2019

GPU and AVX Modules

Calc

ula

tio

ns




• Report generation:

• Option to generate

assumption reports,

tables or both

• Base set runs:

• Perform runs using just

base sets

• Act as a repository for

tables as well as

assumptions

• Parameterised reporting dates

• Set reporting date as a

parameter

• Users with submit, but

not edit, permissions

can submit jobs on

different dates

• Check-in, check-out

development workspaces

• Full workspace compare

• Merge the workspaces

• Roles and permissions –

(model developers and

model steward)

• Versions, branches and

timelines of the workspaces

• Testing

• Audit and supplementary

documentation

• Linking with workflow tools

and notifications

Roadmap in Detail - Governance

Q2 2018

Assumptions Manager

Q2 2019

Collaboration Manager

NEW MODULE

Go

vern

an

ce




Prophet Version Support

PP/PE Version Release Date End of Support Retired Version

Support Option

8.2.3 30 June 2014 Out of support Out of support

9.0.0 31 March 2015 1 October 2017 1 October 2018

9.0.1 29 December 2015 1 July 2018 1 July 2019

9.0.2 29 July 2016 1 February 2019 1 February 2020

9.0.3* 30 November 2016 1 June 2019 1 June 2020

9.0.4 31 August 2017 30 June 2020

Q2 2018 Planned 30 June 2018

* Includes Glean, DCS, PRD, PP & PE API, PQA and Excel Reporting.

Insurance Data Repository Support

IDR Version Release Date End of Support

1.3.0 27 March 2015 1 December 2017

1.4.0 23 March 2016 1 October 2018

1.4.1 8 July 2016 1 January 2019

1.4.2 27 March 2017 1 October 2019

Prophet Operating System support

PP/PE Version Windows 7 Windows 8/8.1 Windows 10

8.2.3

9.0.0

9.0.1

9.0.2

9.0.3

9.0.4

Q2 2018

Q4 2018

All releases after 2018 Q2 will be 64-bit calculations and will require a 64-bit operating system

Prophet Windows Server support

PP/PE Version Server 2008 Server 2008

R2

Server 2012 Server 2012

R2

Server 2016

8.2.3

9.0.0

9.0.1

9.0.2

9.0.3

9.0.4

Q2 2018

Q4 2018


Prophet Compiler Support

PP/PE Version MS 2010 MS 2012 MS 2013 MS 2015 MS 2017

8.2.3

9.0.0

9.0.1

9.0.2

9.0.3

9.0.4

Q2 2018

Q4 2018


Prophet Excel Reporting Support

PP/PE Version 2010 32 bit 2010 64 bit 2013 32 bit 2013 64 bit 2016

32 & 64 bit

8.2.3

9.0.0

9.0.1

9.0.2

9.0.3

9.0.3p3

9.0.4

Q2 2018

Q4 2018


however we will still support the 32-bit versions of MS Office above

Ways to influence the Solutions and Roadmap

Please talk to us by contacting your normal local account manager or:

[email protected] [email protected]

[email protected] [email protected]

[email protected]

Bespoke Developments

Partnership Developments

Roadmap Developments

• Professional Services

• Partner Consultancies

• Niche or Bleeding-edge features

• Agile or Waterfall Engagement

• Working Groups and Advisory Boards

• Customer Surveys

• Account Managers or Product Managers

• Helpdesk for small ideas

mailto:[email protected]

IFRS 17 Group Calculations Library Training

Introduction

Understanding the Modelling Framework

Set-Up and Configuration of an IFRS Product

Interaction with Other Models

Building on Prophet Liability Models

IFRS17 Reporting in Prophet

Summary and Conclusion

http://www.prophet-web.com/support/training/

©2018 FIS and/or its subsidiaries. All Rights Reserved. FIS confidential and proprietary information.

QUESTIONS?

IFRS 17 calculation challenges

17th April 2018

Oscar Weafer, Director of Risk Solutions Management and Strategy

Agenda

37

1. Summary of IFRS 17 calculations

2. FIS response

3. Questions

Summary of IFRS 17 calculations

Building Block Approach

39

FUTURE CASH FLOWS

The net projected future cash flows

RISK ADJUSTMENT

Allowance for non-financial risk

TIME VALUE OF MONEY

The impact of discounting and financial risks

CONTRACTUAL SERVICE MARGIN

New item representing deferred profits

Existing actuarial models can be reused,

although some differences e.g. contract

boundaries

Discount rates may be different from existing

reporting and can vary across contract

groups

No prescribed method, existing risk models

could be used but confidence levels must be

disclosed

Calculation depends on the selected

measurement approach – General Model or

Variable Fee

Used where cash flows do not vary significantly with underlying items

CSM adjusted for changes in the liability due to insurance related assumptions

Locked-in rates

Measurement approaches

40

General

Model

Variable

Fee

Approach

Premium

Allocation

Approach

Amendment for contracts where cash flows vary significantly with underlying items

CSM adjusted for both insurance and financial assumptions

Current rates

Optional simplified method based on unearned premium

No Contractual Service Margin

Liability for future coverage only

Grouping of contracts

41

Insurance

contracts

The total pool of insurance

contracts are disaggregated for the

purpose of measuring the CSM


42

Portfolios are identified,

representing contracts with similar

risks

Insurance

contractsPortfolio A

Portfolio B


43

The portfolios are split by inception

date, with no more than a year

allowable between groups

Insurance


Portfolio B

Cohort X

Cohort Y


44

Onerous contracts are then

measured separately from at least

two distinct profitable groups

Insurance


Portfolio B

Cohort X

Cohort Y

Onerous

No significant

chance of

becoming onerous

Remaining

contracts

Example Profit and Loss prior to IFRS 17

45

Cash Inflow xxx

Cash Outflow xxx

Investment Income xxx

Change in Reserves xxx

Income derived from cash flows and

returns over the period against change in

the liability

IFRS 17 provides a different view

Profit or Loss xxx

Other Comprehensive Income xxx

Comprehensive Income xxx

Income under IFRS 17

46

Insurance Revenue xxx

Insurance Service Expense xxx

Insurance Service Result xxx Insurance revenue represents the release

of liabilities excluding any elements not

presented in P&L

Claims and other expenses are based on

expected amounts

Service Expense reflect actual values and

losses incurred or reversed during the

period


47



Insurance Service Result xxx


Insurance Finance Expense xxx

Investment Result xxx

Investment income is presented and offset

against financing costs

The insurer can choose to disaggregate

the financing cost using Other

Comprehensive Income

In doing so the P&L can reflect the

underlying insurance business

performance more clearly


48







Profit or Loss xxx

The sum of the Insurance Service Results

and Investment Result gives the profit or

loss for the period


49







Profit or Loss xxx

Other Comprehensive Income xxx

Comprehensive Income xxx

Other Comprehensive Income captures

any unexpected movements

disaggregated from the Finance Expense

For example changes in discount rates

Summing with Profit or Loss gives the

Total Comprehensive Income

FIS response

FIS’ IFRS 17 response

51

FULFILMENT CASH

FLOWS

FIS’ Prophet models

provide the building

blocks for calculation of

the Fulfilment Cash

Flows

The FIS approach

builds on existing

models to provide a

governed and

controlled IFRS 17

solution

Modelling of

contract liabilities

CSM AND FINANCIAL

STATEMENTS

FIS’ Prophet IFRS 17

Group Calculations

library calculates the

CSM and populates the

income statement and

related disclosures

Additional contract

group calculations

GOVERNANCE AND

CONNECTIVITY

FIS’ suite of Prophet

governance tools cover

process automation,

assumptions

management, data

handling and

production of results

End to end

processes

High level end to end process

52

DATA

SOURCES

ACCOUNTANCY

SYSTEMS

CORPORATE

DATA

WAREHOUSE

MODEL

SPECIFICATION

DATA AND

ASSUMPTIONS

MANAGEMENT

RESULTS

PRODUCTION

RESULTS

REPORTING

AND

CONNECTIVITY

PROCESS

AUTOMATION

High level end to end process

53

DATA

SOURCES

ACCOUNTANCY

SYSTEMS

CORPORATE

DATA

WAREHOUSE

MODEL

SPECIFICATION

DATA AND

ASSUMPTIONS

MANAGEMENT

RESULTS

PRODUCTION

RESULTS

REPORTING

AND

CONNECTIVITY

PROCESS

AUTOMATION

PROPHET

PROFESSIONAL

NESTED

STRUCTURES

DATA

CONVERSION

SYSTEM

ASSUMPTIONS

MANAGER

GLEAN

PROPHET

ENTERPRISE

PROPHET

RESULTS

DATABASE

INSURANCE

DATA

REPOSITORYPROPHET

CONTROL

CENTER

Scope of IFRS 17 Group Calculations library

54

UNIT OF

MEASUREMENT

Aggregate results for

contract groups

Results from Prophet

models

Results from external

systems

Onerous test for

contracts written

CONTRACTUAL

SERVICE MARGIN

General Model or

Variable Fee

Experience

adjustments and

assumption changes

Loss component and

CSM reinstatement

Coverage units

FINANCIAL

STATEMENTS

Income statement and

balance sheet

components

Analysis of change

and other disclosures

Forecasted values

Transition values

RESULTS

OUTPUT

Closing balances and

expected values for

storage and retrieval

Other reported

information at selected

level of granularity

Format of library

55

MODEL POINT

DRIVEN

Model point represents

a group of contracts

Inputs consist of

configuration switches,

data from current and

last period

Individual Model Point

Output provides closing

and expected balances

Use of diagram view

56

DIAGRAM

VIEW

Diagram view assists

with understanding of the

IFRS 17 calculations

Results can be traced

from the financial

statements to the

underlying data points

Use of SP Codes can

allow additional drill down

of calculations

Reporting templates

57

EXCEL

TEMPLATES

Excel reporting

templates are provided

to assist with

understanding of the

results

Allow for checking of

values by actuarial

teams before passing to

finance

FIS Prophet data and calculation flow for reporting

58

Ledger

IFRS 17 Group

Calculations

Prophet

Models

Insurance Data

Repository

Insurance Data

Repository

LedgerOther

Models

Actual

accounting

valuesLiability values

from Prophet

Liability values

from other

systems

Opening and closing balances,

actual accounting values

IFRS 17

results and

disclosures

Reading from Prophet models

59

Time Group 1 Group 2 Group 3

PV Cash Flows a+c b+d eIFRS 17 Group

Calculations

Prophet liability model

calculate results for

individual contracts

The contract group level

results are read into the

IFRS 17 Group

Calculations library

PV Cash Flows Contract Group

Contract 1 a 1

Contract 2 b 2

Contract 3 c 1

Contract 4 d 2

Contract 5 e 3

Results are aggregated in

the liability models per

contract group

Contract Group IFRS17 Group

1 1

2 1

3 2

Group Mapping table

Present Value

Current rates av + bv2 + cv3

Locked-in rates avl + bvl2 + cvl

3

Current rates d

Locked-in rates e

Reading from external systems

60

Time n n+1 n+2

Cash Flow a b c

Other

Models

IFRS 17 Group

Calculations

Cash flows vectors produced

by external systems can be

passed to Prophet in the

form of tables

Alternatively present values

can be passed to Prophet

directly in table format

Prophet performs the

required discounting of

cashflows to arrive at

present values

The present values are

read into the IFRS 17

Group Calculations library

Both deterministic and

stochastic discount

factors are supported

Present Value

Current rates avn + bvn+1 + cvn+2

Locked-in rates avln + bvl

n+1 + cvln+2

Forecasting

61

To understand the

emergence of profit

and it’s sensitivity to

assumptions

forecasting models

are required

Forecasting of IFRS 17 income statements and balance sheets not only

brings insight into future profits but also the impact of unexpected future

changes

Changes to assumptions in future years

Reaction to market movements

Impact of writing new business

Projection models

Year 1 Valuation Year 2 Valuation Year 3 Valuation

Modelling of unexpected future changes requires the embedding

of a valuation model within a projection model

Prophet’s Nested Structures module provides this capability

A single integrated model allows existing logic to be re-used

and reduces the need for large volumes of data to be managed

FIS Prophet calculation flow for forecasting

63

IFRS 17 Group

Calculations

Valuation

Model

Projection

Model

Projected policy state

Valuation on future

assumptions

Projected actual and

expected positions

Variable Fee Approach

64

Two approaches to

capturing the change

in entity’s share of

underlying items

under the Variable

Fee Approach

Retrospective method looks at changes in the fair value of underlying items

and the change in liabilities over the current period, adjusted for entity cash

flows

Prospective method looks at changes in the present value of future

transfers from the underlying items over the current period, adjusted for

entity cash flows

80

90

100

110

n-1 n

Assets Liabilities

0

5

10

15

n-1 n

PV Shareholder transfers

Premium Allocation Approach

65

Optional simplified

method for

performing IFRS 17

calculations

The IFRS 17 Group Calculations library can perform measurements using

the Premium Allocation Approach as an alternative to the Building Block

Approach (covered by the General Model and Variable Fee approaches)

Other

Models

Prophet Life

Models

Prophet Non-life

Models

IFRS 17 Group

Calculations

GENERAL MODEL

VFA

PAA

Transition

66

Two methods

supported for

calculating the

transition date

balance sheet

Full Retrospective method performs a complete IFRS 17 projection from

inception of the group of contracts, allowing for known decrements

CONTRACT

INCEPTION

TRANSITION

DATE

VALUATION

ON INCEPTION

ASSUMPTIONS

PROJECT IFRS 17 RESULTS ALLOWING

FOR KNOWN EXPERIENCE

VALUATION

ON TIME 1

ASSUMPTIONS

VALUATION

ON TIME 2

ASSUMPTIONS

VALUATION

ON CURRENT

ASSUMPTIONS

Transition

67

Two methods

supported for

calculating the

transition date

balance sheet

Modified Retrospective method performs IFRS 17 calculations at the

transition date and adjusts the CSM for known cash flows

CONTRACT

INCEPTION

TRANSITION

DATE

DISCOUNT TO INCEPTION, ALLOWING FOR

KNOWN CASH FLOWS

VALUATION

ON CURRENT

ASSUMPTIONS

ROLL FORWARD VALUES WITH SPECIFIED

RELEASE PATTERN

Disclosures

68

Additional reporting

items to meet

disclosure

requirements,

covering analysis of

change and new

contracts

Layering onto existing models

69

EXISTING

LIABILITY MODEL

Tailored product

features

Custom reporting

capability

MULTIPLE YIELD

CURVES

CONTRACT GROUP

IDENTIFIERS

SENSITIVITIES TO

ASSUMPTIONS

DISCOUNTING OF

CASH FLOWS

CALCULATION OF

COVERAGE UNITS

GROUPING OF

CONTRACT VALUES

Inputs to model Outputs from model

Example IFRS 17 and Solvency Capital Model

70

Provided as

a standard

template

model

Reference

manual

and excel

templates

Reporting

and

forecasting

applications

General Model

and Variable

Fee

approaches

Risk

adjustment

using cost of

capital method

Included in standard installation

Example data, products and run

configuration

Financial statements and

additional disclosures

New and existing contracts

Use of Nested Structures

Documentation of models

and Prophet feature used

Both deterministic and

stochastic

Explicit future shocks or

risk factor run off

Single or multiple run

IFRS 17 calculations sit alongside and leverage any existing Prophet models

Support provided for both reporting and forecasting applications

Cost effective due to re-use of existing infrastructure

Summary of IFRS 17 Group Calculations library

71

Single

Platform

Use of

Prophet

Features

Availability

and

Support

Diagram view for tracking and understanding of calculations

Open interface for making code changes e.g. to reflect differences in methodology

Inspect IFRS 17 results before transferring to finance

Available now

Included as part of standard support charges

Ongoing library and system updates to support customer needs

Helpdesk and Professional Services support on request

Questions?

THANK YOU

17th April 2018

Oscar Weafer, Director of Risk Solutions Management and Strategy

Headline Verdana BoldIFRS17 Business Impact and Financial Implementation Challenges – Lessons Deloitte18 April 2018

Agenda

Impacts

Implementation timeline

Lessons learned

Impacts

Business impacts

78© 2017 Deloitte Hungary

Market

ReportingStrategy &

Governance

People, Organisation &

Culture

Processes,Systems & Data B

usin

ess

Analy

tics

Revenue GenerationCost Efficiency & Improved Productivity

Change &

Com

munic

atio

ns

IFRS

17

Regulators

Internal Stakeholders

IMPACT

OPERATING

MODEL

PROGRAM

MANAGEMENT

Impact on Operating Model

IFRS 17© 2018 Deloitte Hungary 79

Change and communications. Cost efficiency and improved productivity

Impact #1: Market reporting

AccountingFinancial reporting will change substantially with IFRS 17 and IFRS 9 – on average, up to 90% of the chart of accounts and financial statement positions will be impacted.

Reporting efficiency and improved productivity within finance closing process will be necessary because there will be more figures subject to audit being reported to market.

Management ReportingInternal KPIs will need to be adapted to new external measurements.

The revenue presented in FS will be different from premium, premium will not appear in FS.

Fast close for internal MI will be under even greater pressure to deliver the new figures efficiently. Consistency across products can spur productivity.

Investor RelationsInsurers’ financial reports will offer better compatibility. The IR Director and management need to prepare for analyst/rating agency questions.

On the other hand more trust can be experienced from investors and the significance of MCEV will decrease.


Change, communication and revenue generation

Impact #2: Strategy and governance

Asset AllocationAsset-Liability-Management will be under the spotlight.

More active management of dependencies and accounting mismatches is needed

Are any ALM strategies (e.g. based on equity securities for long durations) no longer viable? Are new hedging instruments the response?

Forward Looking Statements, Financial Planning & ControllingForward looking statements have to be reassessed. To do that planning/forecast processes have to be adjusted to the new metric arising from IFRS 9 and IFRS 17 earlier than their release in the first public report

It may be useful to perform simulations on the impact of the new IFRSs on KPIs based on IFRS earnings/equity at an early stage

More stable and strict pattern for realizing profits – less freedom on profit level for a given period

Product Design and PricingChanges in product valuation will greatly impact actuarial methods, product design and pricing, since the present value of profits will be materially different.


Revenue generation and business analytics

Impact #3: People, organization and culture

Human ResourcesThe whole organization will need to be educated on how the group’s success is measured and presented to the market under the new IFRS.

The KPIs used for the incentives and remuneration of employees and sales force will need to be recalibrated.

More resources will be needed to implement the new IFRS. The resources are scarce due to the fact that only limited number of resources having the new IFRS skillsets.

Control environment and organizational designGreater external transparency (in aggregate) is expected to demand more detailed audit trail and „historization” of financial and actuarial data.

The interaction between finance, risk and actuarial will increase (cross-skills opportunities) offering the opportunity to integrate these functions.


Cost efficiency and productivity with a risk/finance analytics platform

Impact #4: Process, systems and data

RiskRisk reporting and financial reporting (IFRS) need to be aligned/the differences need to be reconciled and explained.

ActuarialExisting models need to be adapted to the new regulations –new data flows/calculations/projections need to be implemented (e.g. new risk adjustment).

Moreover, actuarial calculations affect almost all items in P&L and also in OCI > e.g. revenue is calculated by actuarial technics along with liability calcs

Operations/ITNew IFRS requirements need to be designed, implemented, tested, brought into production and maintained/operated.

There will be a significantly increased need for amount of data, computations and disclosures in a short time period (quarter).

Changes in systems must be planned at an early stage to minimize disruption.


Indicative architecture related to IFRS17 data & processes

IFRS17 - Benchmark of main IT solutions

Indicative Architecture & Data flow

Source systems

Collection

Policy Administration

Claim management

Consolidation

Consolidation

Engine

Reinsurance

Source

SystemsIntegration, Calculation, Orchestration, Storage

Data

Sta

gin

g

Investment Management

Inte

gra

tion L

ayers

Data

ware

house

/ D

ata

Lake (

opera

tional data

)

Actuarial Systems

Pricing

General Ledger

Finance

Subledgers

AP,AR,AA,TR, etc.

Business planning

Planning/

controlling

Controlling

Actuarial calculation

ALM

Risk Management

ORSA

Market data

Governance (process & data)

Internal Capital Model

Reporting / Analytics

BI

Data

ware

house

(Report

ing)

Workflow / automation

Controls and Audit Trail

Regulatory / Statutory Reporting

Financial Reporting

MIS Reporting

Budget/planning Reporting

Risk Reporting

Posting E

ngin

e


Main areas impacted by new IFRS17

IFRS17 - Benchmark of main IT solutions

Indicative Architecture & Data flow

Source systems

Collection

Policy Administration

Claim management

Consolidation

Consolidation

Engine

Reinsurance

Source

SystemsIntegration, Calculation, Orchestration, Storage

Data

Sta

gin

g

Investment Management

Inte

gra

tion L

ayers

Data

ware

house

/ D

ata

Lake (

opera

tional data

)

Actuarial Systems

Pricing

General Ledger

Finance

Subledgers

AP,AR,AA,TR, etc.

Business planning

Planning/

controlling

Controlling

Actuarial calculation

ALM

Risk Management

ORSA

Market data

Governance (process & data)

Internal Capital Model

Reporting / Analytics

BI

Data

ware

house

(Report

ing)

Workflow / automation

Controls and Audit Trail

Regulatory / Statutory Reporting

Financial Reporting

MIS Reporting

Budget/planning Reporting

Risk Reporting

Posting E

ngin

e

Storage and

transformation of

operational data

Actuarial models and

calculation

Accounting &

Controlling

Reporting

Automation & process control

1 2

3

5

6

Consolidation

4

0

Financial impacts


Impacts at introduction

Capitalposition

Effects at introduction

OptimizeCSM

Optimizeefforts

Release ofextra

prudence

Investment policy upgrade

Capital decrease

Capital increase

No effect on capital, if there has been discounting before. Otherwise small discounting impact.

Agressive(recognised earlier than service provided)

Conservative(recognised later than service provided)

Moderate(recognised in line with service provided)

Profit recognition pattern and capital impact at transition



Capitalposition


OptimizeCSM

Optimizeefforts

Release ofextra

prudence

Investment policy upgrade

Each bar represents the cohorts issued in those years and part of the different portfolios

IMPRACTICABILITY ARISES

IMPRACTICABILITY ARISES

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Cohort of product sales



Capitalposition


OptimizeCSM

Optimizeefforts

Release ofextra

prudence

Implementation

At transition the existing prudence level in provisions should be investigated, and any surplus above the best estimate of present value of future cash-flows plus the risk adjustment should be released.

Implementation timeline


Implementation of IFRS 17

Key d

ate

sPro

ject

milesto

nes

Preliminary

plan, design

and budget

approval

Revised plan and

design

Implementation

Check/ UAT/

user training

Transi-

tion

Finalise

com-

para-

tives

Finalise

OBS

Parallel runs

Go live

Final standard

1/2018 IFRS 9 Effective date

Possibility of deferral of IFRS9 if insurance activity is prevailing.

1/2019 Potential early adoption

1/2021 Effective date

2017 2019 2020 20212018

IFRS 17

IFRS 9

Analysis and planning phase


Initial steps

Impact assessment

As a next step, an impact assessment should be performed in order to identify the impacts and gaps and also to determine

the implementation roadmap.

Such an analysis would typically consist of:

Business impact analysis (“BIA”)In fact a gap analysis from a data, systems and processes perspective. Should be concluded with a realistic and achievable roadmap to implementation.

Financial impact analysis (“FIA”)This analysis should quantify the impact of IFRS 17 on the insurance company’s financial statements and ultimately its profit profile.


Impact assessment by Deloitte

S3: Business impact assessmentIdentifying key impacts and options on the reporting process

S1:

Training and mobilizationRaising awareness and

training of key managers

and stakeholders to ensure

alignment on the IFRS 17

concepts and project

objectives

S2: Financial impact assessmentInitial (high-level) calculations of the IFRS 17 P&L and balance sheet, transition

assessment

S4: Data and systemsPreliminary impact study on data and systems to identify gaps and define the

target IT architecture

S5: RoadmapDefining the implementation

roadmap and the expected effort &

resources needed

1 2 3 4 5

PMO Support

Months:

Five working streams covered by PMO Support

What are the main challenges? –Lessons learned


Lessons learned – Business impacts

Process

Systems

Data

Many existing processes (unbundling, discounting, expense split, countact boundaries) can be leveragedfrom, however further developments are necessary

Many cases shall be completely created (CSM, RA, onerousness, transition)

Automatisation and optimalisation

Actuarial models have to be upgraded

It has to be decided where to calculate CSM

‚Group of contracts’ (level of granularity) raiseschallenges

Expense split

New presentation and disclosures

New model points necessary

New information have to be stored

Data source management

Historical data and assumptions for transition


Lessons learned – Financial impacts

Modelling solutions

Reconciliation issuesApplicable simplificationsHuge data needHistorical assumptions (EV/SII can only be partially

leveraged)Which products to model as representative ones for

the total portfolio

Excel tool – better understanding

Prophet – easily produce results for total portfolio

Input data


Lessons learned – Financial impacts

Examples:

• Life: https://goo.gl/nJXKKy

• Non-life: https://goo.gl/PyV4za

https://goo.gl/nJXKKy

https://goo.gl/PyV4za

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