Contemporary Issues in

Life Insurance

Life Insurance Practice Committee

Contemporary issues in

Life Insurance • Regulation

• Economy

• Actuarial/Accounting

• Competition

• Trends

Contemporary Issues in Life Insurance

Regulation

• Life Act Review

• APRA/ASIC

• Tax

• IASB

• IAIS

Contemporary Issues in Life Insurance

Regulation

Life Act Review

• Background of HIH, etc

• Significant delay in timing

• Minor review or major re-write?

– Change in capital requirements?

– Change to LIASB?

• Opportunities?

Contemporary Issues in Life Insurance

Regulation

APRA/ASIC

• APRA

– Changes since HIH

• ASIC

– FSRA (issues for ASIC as well as industry!)

Contemporary Issues in Life Insurance

Regulation

Tax

• Ordinary business

• Consolidation

– cross guarantees

– fair share

• Implications of 30 June 2005

• FITB

– covered later

Contemporary Issues in Life Insurance

Economy/Environment

• Investment performance

• Global economy & outlook

• Profitability

– disability experience (incl GSCI)

• Guarantees & options

Contemporary Issues in Life Insurance

Economy/Environment

Investment Performance

Contemporary Issues in Life Insurance

UK Life Index vs FTSE

50

100

150

200

250

300

350

400

450

Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

Date

Valu

e (

Base =

100)

FTSE Index FT Life Index

Economy/Environment

Investment Performance

Contemporary Issues in Life Insurance

0

20

40

60

80

100

120

Ja

n-0

1

Fe

b-0

1

Ma

r-01

Ap

r-01

Ma

y-0

1

Ju

n-0

1

Ju

l-01

Au

g-0

1

Se

p-0

1

Oc

t-01

No

v-0

1

De

c-0

1

Ja

n-0

2

Fe

b-0

2

Ma

r-02

Ap

r-02

Ma

y-0

2

Ju

n-0

2

Ju

l-02

Au

g-0

2

Se

p-0

2

AM PAXA Asia PacificTow erC hallenger Intl

Australian Life Office Share Prices

Actuarial/Accounting Issues

• LIASB standards

• International Accounting Standards

• Professional Standards & Guidance Notes

• Appointed Actuaries

• Financial economics

Contemporary Issues in Life Insurance

Actuarial/Accounting Issues

LIASB standards

• Discussion Notes

– asset quality

– solvency assumptions (DI)

– structured settlements & substandard lives

• Asymmetrical risks in policy liabilities

(AS1.03)

• Management capital (AS6.02)

• Investment risks

– impact of “matching” strategies Contemporary Issues in Life Insurance

Actuarial/Accounting Issues

IAS Issues • Wide-ranging impact from 2005

– IAS39 for investment

– local GAAP for insurance

– product classification

– DAC

– deferred tax

• Insurance Standard from 2007

• Business impact

– profit volatility

– international comparability? Contemporary Issues in Life Insurance

Competition

• Distribution

– commission structure & levels

– margin squeeze

• e-business

• Products

– continued growth of Wrap products

• Reinsurance

Contemporary Issues in Life Insurance

Trends

• Structural change / M&A

• Change in Appraisal Values?

• Funds management

• Banks

• Genetics

• New products

• Product rationalisation

• Cost focus

Contemporary Issues in Life Insurance

Trends

Current New Zealand Issues

• GN5 Prudential Reserving

– under revision

• 1908 Life Act

– Law Commission review

• Insurance working group

– actuaries and accountants

– international accounting

• IRD

– completed review of reserving bases Contemporary Issues in Life Insurance