Annuities and IFRS4 Phase II

Perspectives

Annuities and IFRS4 Phase II

Financial Services Forum 2016

This paper provides insight into the possible future landscape of life insurance products in Australia as retirement income strategies as well as the impending IFRS 4 Phase II standard come into focus.

Historically Australians tend to bear the longevity risk (relating to their retirement income) themselves. That might change in the future as “baby boomers” reach retirement age which brings strategies around retirement income into focus. Tax reforms that enhance annuity type of products could relieve pressure on Government pension payments. This presentation first briefly discusses the potential of Australian annuity products in the future. Next the consequences on financial and actuarial reporting are considered in the scenario where annuity products are widely adopted in Australia. We compare the IFRS 4 phase II requirements with current MoS requirements for an example annuity product; using this example product the Building Block Approach (the ‘General Model’) is explained for both measurement at initial recognition and subsequent measurement. We end the presentation with possible implications for product design of annuities and the required changes to reporting systems and processes.

Annuities: Future market potential and Consequences for Reporting under new IFRS 4 Phase II

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About the presenters

Martin Lam

Martin is a Director within the Financial Services Actuarial Consulting team. He has over 21 years’ experience in the financial services industry in Australia and Asia. He has been CFO, Chief Actuary and Appointed Actuary for a number of life insurers. Martin specialises in life insurance capital and solvency assessment as well as actuarial modelling efficiencies and design (especially in Prophet). He has a deep knowledge of ICAAP and LAGIC.

Cornelis Slagmolen

Cornelis joined Deloitte Actuaries & Consultants in August 2015.  Prior to this, he was working at Deloitte Netherlands for more than 5 years. He has a focus on the development and validation of quantitative models, actuarial reporting and capital calculations. Cornelis was involved in developing an annuity product example used for illustrating the concepts of IFRS 4 phase II and it consequences for the Australian market and has facilitated several workshops on IFRS 4 phase II.

Annuities: Future market potential and Consequences for Reporting under new IFRS 4 Phase II

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