Article
Exponential Actuary – How Will the Role of Actuary Be Transformed
About the report
IFRS 17, the new accounting standard on insurance contracts, will be effective for annual reporting periods beginning on or after 1 January 2023. This raises a big question on the impact on Actuaries in financial reporting post the effective date.
At the Actuarial Society of Hong Kong's Actuarial Summit, Deloitte Actuarial and Insurance Solutions Partner Ka Hei Choi presented, discussed and shed light on the differences between the current and future reporting process; and how the process change will transform the actuaries' role.
Viewpoints
1. In the future, IFRS 17 valuation involves a series of business and system processes, which requires close collaboration between Actuarial and Finance. This differs from traditional process where Actuarial and Finance departments are segregated with clearly defined division of work and limited co-working.
2. The ability to understand the right business questions, modelling expertise to gain the insight and the presenting capabilities to communicate insight in a compelling way are important skills for a successful actuary in the digital world.
3. Future IFRS 17 processes will transform the actuaries' roles and responsibilities, require development of new skillsets and enhance collaboration with people.
IFRS 17 Processes |
New Role |
New Skillset |
New Collaboration |
Data extraction & transformation |
Coordinate with data team to perform off-cycle system logic updates |
Possession of ‘sense’ of data and ability to extract information from massive volume of data |
Reliance on IT experts to automate data processing |
Cash flow generation & CSM calculation |
Interpret effect of cash flow movements on CSM of individual contract groups |
IFRS 17 knowledge on how current and future cash flows affect CSM |
Bring together accounting professionals’ understanding of dynamics in “actual” cash flows |
Account posting & financial reporting |
Analyze and interpret financial results to generate and deliver business insights |
Knowledge of financial statements and basic understanding of accounting ledgers |
Leverage on accounting experts in specialized aspects and unique practice of the company |
CSM – contractual service margin
4. Insurance companies should refine the financial reporting process and responsibility matrix for IFRS 17. Beyond IFRS 17, they should develop new management information and business planning approach to utilize the more granular data available due to IFRS 17. Actuarial professionals should coordinate with accounting professional bodies to ensure accountants and actuaries acquire relevant knowledge to work together.
