pwc ifrs 17 and hkrbc service offerings · effective functioning of internal controls. transition....

PwC IFRS 17 and HKRBC service offerings

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Indicative next steps

• How effective is your IFRS 17 programme set up and managed? – We offer to review your programme plan, and assess its risk profile. This also allows you to determine where assurance will add most value / plan potential programmeassurance interventions.

• How are you progressing relative to the market? - We can support you leveraging our market insight and best practises, eg. with deep dives on technical choices, design, vendor selection or market messaging

• Are your programme staff, senior stakeholders and BAU staff aware and trained in IFRS 17? – Schedule training interventions during the programme.

The changes which IFRS 17 requires will affect almost every stakeholder and functional area in your organisation.

Many insurers will need to make substantial changes to their target

operating model (“TOM”). The end state IFRS 17 presentation and disclosures will communicate your financial position and performance to the market and stakeholders.

A well-coordinated and effective assurance approach will support the successful delivery of an IFRS 17 implementation that is well embedded in your organisation. It will ultimately provide stakeholders with confidence in your financial reporting figures. Early assurance over IFRS 17 methodologies and systems will significantly alleviate the pressure on the project resources and the business during the crucial year of transition.

IFRS 17Independent assurance for your IFRS 17 programme

Optimise your programme and gain greater confidence in your programme’s ability todeliver IFRS 17, on time and with the expected quality

Effectiveness of methodology choices and compliance with standard –consider the impact of different methodology choices, minimise the risk of non compliance and rework at later stages of the programme.

How can we help? – Plan and deliver early assurance and confidence in the methodology decisions that have been made, project progress and outputs up to the final presentation and disclosure.

Effectiveness of your design – To deliver the intended scope/strategy and a target operating model that is well embedded in the organisation.

How can we help? – Review and make recommendations based on your design of data and systems architecture, processes and models. Provide best practices and industry insights.

Controls framework and testing –Ensure control adequacy and effectiveness, given additional data requirements and complex modelling required by IFRS 17.

How can we help? – Review and make recommendations over the adequacy and effectiveness of your enhanced control environment.

Model reviews – Ensure that actuarial and financial models produce accurate and complete results and models are managed within a robust governance environment.

How can we help? – Review and test models to ensure that there are adequate and effective controls over model development and model use. Assessing the residual risk relating to models and testing model inputs, model functionality and outputs accordingly.

Effective set up and delivery of your programme – To manage financial and human resources effectively for a timely delivery of the right scope and results.

How can we help? – Programmeassurance to enable stakeholders to recognise and focus on key issues and risks and take appropriate actions. Add independent credibility to key information produced.

Successful transition and market messaging – Managing the financial reporting and communication processes during the transition year is key to establishing stakeholder confidence.

How can we help? – Assurance over your planned transition approach, judgements and estimates, accuracy andcompleteness of data and results.

Training people – To build the capability from the start and during the delivery, to define requirements appropriately and successfully transition and communications with the market.

How can we help? – Provide training materials, including e-learns, and facilitate training sessions and workshops covering both the technical and practical aspects of IFRS 17. This will be tailored to the respective audience.

IFRS 17 essentials

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Key benefits

IFRS 17 assurance provides greater confidence to stakeholders regarding the quality and timely delivery of the programme, specifically:

• Enables stakeholders to recogniseand focus on key areas and risks early to advance their resolution and de-risk programme delivery.

• Provides ongoing advice, support and review regarding areas of high attention, the mitigation of identified risks and the remediation action.

• If conducted sufficiently early in the programme life cycle, identifies whether the programme has considered all needed elements and is therefore set up for success.

• If conducted sufficiently early will prevent late changes to methodology, control design and transition approach.

Our existing working relationships will enable us to share industry knowledge, best practices and benchmarks tailored to your needs.

Using IFRS 17 assurance alongside your programme

Deep dive on the effectivenessof governance and change

management

Impact assessment Strategy and architecture

1. Review and challenge results of impact assessmentAim - Ensure adequate coverage of businesses and operations.

2. Review transition strategy Aim - Early view on appropriateness of selected options for transition.

3. Review high level target architecture Aim - Adequate coverage of target architecture to cover all IFRS 17 data and disclosure requirements.

Deep dive on benefits management and

realisation

High level design

4. Review methodologiesAim - Early view on appropriateness of selected options for transition.

5. Review high level target architecture Aim - Adequate coverage of target architecture tocover all IFRS 17 data and disclosure requirements.

6. Review data model designAim - Accuracy and completeness of data required for IFRS 17 compliance.

Detailed design

7. Review detailed designAim - Effectiveness, alignment with strategy and requirements.

8. Review detailed control designAim - Adequacy of control design for financial statement audit purposes.

9. Review actuarial and financial modelsInternal Audit - Ensuring the right stakeholders are engaged in the design and review of new models implemented.

Parallel run

10. Control effectiveness testingAim - Comfort over effective functioning of key controls

11. Review test assumptionsAim - Reasonability of IFRS 17 assumptions

12. Review transition plansAim - Completeness and effectiveness

Deep divecompleteness and

effectiveness of the test strategy

Deep dives on data migration and

operational resilience

Deep dive on business and

technical readiness

Deep dive on BAU

support model

Construct and test

13. Iterative controls testingAim -Effective functioning of internal controls

Transition

14. Support with transition and market messaging

Deep dive reviews

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Why PwC?

Our IFRS 17 assurance framework

The work will be led by a specialist team with significant experience providing programmeassurance over complex transformations and who also have experience actually delivering large transformation programmes.

Our proven programme assurance methodology and approach – ‘The 12 Elements of Delivery Excellence’ – will underpin our work. This methodology we will focus on the aspects that can allow you to optimise the delivery of anIFRS 17 implementation that is fit for purpose, with sufficient agility of the individual workstreams, and steered effectively e.g. with an earned value approach.

Provide independent assurance throughout your IFRS 17 programme, tailored to your needs. This can include:

• Continuous assurance in the form of input to working groups and steering committees to provide challenge and guidance using our industry knowledge.

• Health-checks during the programme life-cycle helping to identify key risks early and generate lessons learned at key stages. We will assess/support you to address the key elements enabling successful programmedelivery:

─ Sufficiently defined programme strategy , scope definition, consistency with strategy, ensuring the programme is linked to business objectives and benefits tracked;

─ Stakeholder engagement, to ensure the delivery meets their needs;

─ Effective design, fit for purpose and well embedded in the organisation;

─ Effective delivery model, to manage complexity, keep agility, ensure the quality of results. Manage resource challenges early;

─ Governance, reporting, control, to involve all relevant areas with clear ownership. Effective and correct reporting on milestones and risks.

• Deep dives on specific work streams or key areas as required.

• Gate reviews on the delivery of the programme and business readiness at key milestones in the delivery life-cycle.

Review and recommend on the effectiveness of your design of data and systems architecture, processes, models. Provide best practices/industry insights.

Provide assurance over the adequacy and effectiveness of your control environment and its future state after implementation. We will also consider where the control environment can be rationalisedalongside the development of the IFRS 17 architecture:

• Test the integrity of new systems;

• Provide internal control recommendations.

Bringing forward this work to minimise the risk of surprises in 2022 and onwards and provide on-going assurance during the project.

Programme assurance Review of the overall design and controls framework

IFRS 17 assurance framework

4 PwC IFRS 17 and HKRBC service offerings


Through our existing close working relationships through the industry we have the greatest breadth of knowledge across all your key markets, systems, processes and people. We will therefore provide a tailored assurance approach focusing on your specific risk areas and aligned to your ways of working.

We bring in technical and regulatory subject matter experts (“SMEs”) to provide deep dive focus as required. This includes specialists on IFRS 17 but also around specific other areas of your programme, e.g. actuarial, technology, target operating model, people and change leads, data architects, operational resilience experts etc.

To date, we have completed/in delivery more than 140 IFRS 17 implementation projects around the globe. We will leverage our industry knowledge and will be able to include best practices and comparatives in our programme assurance review and results.

The depth and breadth of our insurance industry client base means that PwChas the insight, knowledge, expertise and experience to provide assurance on your specific IFRS 17 programme.

Provide continuous technical support and challenge throughout the programme to avoid any issues late in the programme. This technical analysis and support may consider:

• Choice of measurement model and PAA eligibility (where relevant).

• Portfolio/unit of account and mutualisation interactions.

• Risk adjustment approach and calibrating confidence level disclosures.

• Calculation of CSM and CSM amortisation patterns.

• Calculation of discount rates.

• Application of the VFA model.

• Interactions with IFRS 9 measurement model (to the extent investments are not FVTPL).

Actuarial/Finance model reviews:

• Assurance over accuracy and completeness of model input data, model functionality and model output.

• Design adequacy and effectiveness of model governance processes and controls.

• Model testing through parallel calculations.

Provide material for and facilitate education sessions and workshops covering both the technical and practical aspects of IFRS 17 in order to:

• Train C-suite and Audit Committee members;

• Train and share knowledge with the project team, including detailed worked examples;

• E-learns to develop technical knowledge of the standard;

• Share best practice and industry knowledge.

• Review / support regarding your transition approach

• Support your vendor selection and new vendor due diligence process

• UAT and defect management support

Technical analysis, support and training Various additional support for your implementation

5PwC IFRS 17 and HKRBC service offerings


Hong Kong Risk Based Capital



Background

The Insurance Authority of Hong Kong released a draft ‘Guideline on Enterprise Risk Management’ (ERM) in May 2018 as part of its ongoing consultation and development of a Risk-Based Capital (RBC) regime for the Insurance Industry of Hong Kong. It outlines the objectives, guidance and expectations that the regulator would have in order to assess the overall competence of an ERM framework and Own Risk and Solvency Assessment (ORSA). Implementation is proposed to take effect from 1 January 2020.

PricewaterhouseCoopers LLP (“PwC”) has conducted a survey to consult risk managers across the Hong Kong insurance market to gain their insights into the current state of ERM frameworks and ORSA capabilities within their institutions. The survey results provide an understanding of the overall readiness of the industry for the upcoming Pillar II requirements, and identifies specific areas of challenge in advance of the proposed implementation deadline.

PwC ERM and ORSA

Readiness Survey 2018Key Findings

• There is a varied state of readiness across the industry.

• Maintaining a strong risk management strategy is a growing strategic priority for most.

• Risk functions are often small in size and lack experienced ERM specialists. There is work to be done to increase the standing of the risk function within organisations.

• Risk frameworks are at varying stages of maturity and some firms still need to develop the essential elements.

• Stress and scenario testing requires enhancement.

• Risk Appetite is a maturing concept within insurers.

• There are inconsistent classifications and definitions of risks across the market and the regulators.

• Risk oversight is often a high priority in the governance structure, but reporting capabilities require enhancement

• Data risk is insufficiently managed across the market.

• Risk quantification in the market is immature by global standards.

7PwC IFRS 17 and HKRBC service offerings


Capabilities

Risk Function Skills and Capabilities• PwC can identify and document the right

person/ people to take the role of the risk function alongside their existing responsibilities. Ensure that these people have the right skills, time and independence to take this role

• PwC will make suggested changes to the role description and necessary reporting lines

• PwC will train the individuals and Management in the role of the risk function

Risk Governance and Stakeholder Management • PwC can establish reporting processes

between different parts of the business and the Risk Function and formalise these in regular reporting

• PwC can make suggested amendments to Committee and Board TORs

• PwC can develop a simple and effective Risk MI suite for management

Risk Appetite and capital• PwC can review your QIS submissions,

work through the outputs and deliver workshops to discuss business capital-efficient business strategies

• PwC can review your economic capital model, identify gaps and remediation, and benchmark it against global best practices

• PwC can develop a risk appetite framework and appropriate statements which fit with your strategy

• PwC can help you to develop and incorporate Risk-Adjusted Performance Metrics (e.g. RoRAC) into business steering

Risk Management Framework, Processes and Reporting • PwC will review risk policies, feeding

back on gaps and improvements, to create a usable, effective and efficient suite of risk policies fit for your risk profile. This will include all necessary risk types under HKIA requirements

• PwC will help you to develop an ORSA policy and report as well as establishing the process to produce regular ORSA reports simply.

Governance Risk and Compliance Systems• PwC will ascertain the need for risk and

compliance systems and establish user processes if needed.


PwC IFRS 17 and HKRBC service offerings 9

• Track record of helping leading companies make better business decisions that balance risk and reward.

• Access to risk management practices at leading companies across the world and across your industry.

• A local team supported by a global network of professionals experienced and credentialed in risk management and compliance.

• Rated "Strong Positive" in Gartner's MarketScope for Global Enterprise Governance, Risk Management and Compliance Consulting Services - the highest rating possible.

Why PwC?

PwC’s ERM Framework

• Our ERM framework is made up of a series of building blocks that can be organised into flexible combinations to provide the right solution for your ERM program. Each building block comprises a number of components and elements that when combined, make up the foundation for your ERM program.

• As part of defining your customised ERM approach, we will work with you to develop a road map and define which aspects of the framework you want to implement first.

01 Risk Strategy

02 Obligations

03 Risk Appetite

04 Risk Profile

05 Stakeholder Management

06 Governance, Risk & Compliance Structure

07 Governance, Risk & Compliance Policies

08 Monitoring & Reporting

09 Key Risk Indicators

10 Risk Modelling

11 Risk Analysis Techniques

12 Business Process Integration

13 Risk Culture

14 Performance Incentives

15 Governance, Risk & Compliance Training

16 Governance, Risk & Compliance Technology

Business process Business management Business platform

Business Strategy

Business Management

Business Platform

Risk Strategy

Risk Appetite

Risk profile

External communication & stakeholder management

Governance, organisationand policies

Business performance,risk monitoring, reporting and KRIs

Risk analysis and response selection

People, change and reward

Business process Management information, technology

and infrastructure


ERM Maturity Assessment Tool

ORSA Governance StructureAppetite Framework Template

Remediation Roadmap Tool

PwC proprietary PAA eligibilityassessment tool

Regulatory support Strategic advice Capital efficiency reviews Governance

We have existing tools and capabilities that we can use to make a fast start across a number of technical areas, leveraging off our experience of delivering a number of similar engagements

We already provide a number of services to local and global P&C insurers in Hong Kong

Audit

Proactive assurance

IFRS 17 & IFRS 9

Licence application

Market entry

Business planning

Technical pricing

Mergers & Acquisitions

RBC

Reserve reviews

Reinsurance effectiveness

Processes and controls

ERM

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Our team

Our team of experts have both local and global experience in supporting P&C insurers with regulatory change

Chris HancornPartnerActuarial Leader, Hong Kong

+852 2289 [email protected]

Billy WongPartnerAssurance, Hong Kong


Lars NeilsenPartnerInsurance Leader, Hong Kong


Maurizio BustiPartnerActuarial Leader, Greater China and South East Asia


Our P&C team in Hong Kong

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This content is for general information purposes only, and should not be used as substitute for consultation with professional advisors.

@2019 PricewaterhouseCoopers Limited. All rights reserved. PwC refers to the Hong Kong member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. PMS-000308

www.pwchk.com

pwc ifrs 17 and hkrbc service offerings · effective functioning of internal controls. transition....

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