After a tumultuous 24 months in the grip of a global pandemic, the emphasis as we start this new year is on recovery, risk and regulation.

At RNA, our focus is always firmly on listening to customers, so we can learn how best to support them with the right tools and techniques to help them achieve their goals.

IFRS17

Our conversations with customers worldwide show that IFRS17 is firmly at the top of the agenda at the start of 2022. Over a decade in the making, and several years in internal development, the IFRS17 go live date is almost here for many insurers.

“With 2023 approaching, many insurers have moved, or are moving, their IFRS17 development phase into test/deploy stage, which may soon become those model cases in the industry,” explains Alex Tsai, Head of Greater China, Sales, RNA Analytics. “Some have not yet reached this stage, and may be struggling to meet the minimum basis – particularly those with a due date of 2023. Others appear to have adopted a ‘wait and see’ approach – especially those companies for which implementation is not expected until 2026."

Detailed conversations are also taking place with external auditors to agree methodologies, adds John Bowers, Actuarial Product Director, RNA Analytics. These are focused in particular around transition and risk adjustment, so as to avoid any unexpected complications when it comes to signing off the new accounts.

“Insurers are heavily focused on parallel reporting runs and ironing out practical or process issues to achieve a smooth a transition as possible – both from a profit stability / shareholder / investor perspective, as well as from an internal resource and management perspective,” Bowers adds.

New normal, new ESG

The profile of environmental, social and governance risk factors has been raised significantly over the past few years. Not to be confused with the niche acronym amongst actuarial modelers referring to Economic Scenario Generators, ESG is today more widely used to encapsulate everything from environmental sustainability to social inclusivity and ethical conduct.

“ESG factors are a critical issue for all firms, bringing challenges and opportunities in brand awareness and risk, customer loyalty and trust, and investor perception risks,” Bowers explains.

New investment dynamics

Potentially an extension of ESG risks, oil and gas investments may pose a long-term investment risk in life and pensions. The potential scale of the challenge means this area merits close inspection.

“Traditionally oil and gas has made up significant proportions of long-term investment funds such as those used by pension schemes. The combination of the increased social pressures of moving to greener energy and also the increased cost of oil and gas mining is starting a trend of investment funds moving away from these traditional investments,” Bowers says.

Divestment on a scale of multiple billions of dollars in the oil and gas industry will create difficulties for insurance and pensions firms, which will be forced to find equivalent long-term investments. Global markets may also see a shift because oil and gas companies make up a large proportion of portfolios in the major investment hubs.

Whilst the worst of the pandemic is behind us, the coming year still brings with it a great many challenges. At RNA, we stand by to support our customers as they rebuild following the global economic fall-out, and work hard to return to full health.