Insurance Breakfast Briefing
28 November 2019
Welcome & Introduction
Brian Morrissey Head of Insurance, KPMG Ireland
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2019 at a glance ……………. 2020 more of the same?
2018
■ Global Capital Standards■ Culture, Diversity and Conduct■ “SEAR” regime■ Enforcement■ Outsourcing/ Service companies■ Recovery and Resolution
■ Convergence■ SCR Review■ Cross Border models■ Sustainability/Climate change■ Recovery and Resolution
Brexit
■ Political process■ Hard Brexit scenarios
■ IFRS17 focus
■ Capital efficiency
■ Cost & transformation
■ M&A activity■ Portfolio consolidation
■ One year delay■ Implementation challenge
■ Transparency■ EU Directives/ BEPS■ Legislative change
■ Operational resilience■ Process improvement & automation■ Distribution opportunities/ threat■ Transformation?
■ Transparency■ PRIIPs/ IDD■ Consumer risk agenda■ Cost of insurance
Central Bank of Ireland Update
Andrew CandlandHead of Actuarial, Advisory and Major International Insurance Firms, Central Bank of Ireland
Financial reporting update
Brian MedjaouPrincipal, Financial Services Audit, KPMG Ireland
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• Current consultation is being supported by impact assessments:• Number of firms have been asked to provide quantitative impacts of proposed changes.• Expected that same firms will be asked to engage in another such study in Q1 2020.
• Current consultation covers number of issues EIOPA are considering:• Q1 2020 impact study may be more reflective of expected final advice to Commission
• Number of areas where no change proposed• Consultation presents results of EIOPA investigations supporting this view
• Some areas where significant changes set out:• Extrapolation of Risk-free Rates:
• Last liquid point of Euro swap curve & potential extensions to this• Potential additional regulatory disclosures
• Interest Rate Shocks:• Move to relative shift approach.• Downward interest rate shock to become more onerous
• Volatility Adjustment Redesign• Number of options considered to redesign structure and operation
2020 Solvency II Review - EIOPA Consultations
IFRS update
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What’s new under IFRS for 2019
Description IASB effective date
EU Effective date
IFRS 16: Leases 1/1/2019 1/1/2019
IFRIC 23: Uncertainty over Income Tax Treatments 1/1/2019 1/1/2019
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement 1/1/2019 1/1/2019
Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures 1/1/2019 1/1/2019
Annual Improvements 2015-2017 Cycle: IFRS 3, IFRS 11, IAS 12, IAS 23 1/1/2019 1/1/2019
Amendments to IFRS 9: Prepayment Features with Negative Compensation 1/1/2019 1/1/2019
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• Current consultation is being supported by impact assessments:• Number of firms have been asked to provide quantitative impacts of proposed changes.• Expected that same firms will be asked to engage in another such study in Q1 2020.
• Current consultation covers number of issues EIOPA are considering:• Q1 2020 impact study may be more reflective of expected final advice to Commission
• Number of areas where no change proposed• Consultation presents results of EIOPA investigations supporting this view
• Some areas where significant changes set out:• Extrapolation of Risk-free Rates:
• Last liquid point of Euro swap curve & potential extensions to this• Potential additional regulatory disclosures
• Interest Rate Shocks:• Move to relative shift approach.• Downward interest rate shock to become more onerous
• Volatility Adjustment Redesign• Number of options considered to redesign structure and operation
2020 Solvency II Review - EIOPA Consultations
IFRS 16 Leases
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Recognition and measurementMeasure your lease liability
Measure your ROU asset
The lease liability is the present value of all future
lease payments.
The Day 1 Right-of-Use asset is measured as the
lease liability.
Identify your leases
Think of all supplier arrangements where they are using a specific asset
to deliver the service
Account for subsequent changes
Reassessments, modifications, revised
payments
Lease term Purchase options Termination penalties Variable payments Rent reviews Discount rate
Pre-commencement payments
Lease incentives Initial direct costs Dismantling and
restoration costs
Outsourcing arrangements
Significant supply arrangements
Supplier equipment provided at no cost
Revisions to discount rates on remeasurement?
Liability changes through the ROU asset or P/L
Modifications may/may not result in separate leases
ROU asset impairment
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Disclosure requirementsTransition to IFRS 16
Transition method and impact
Explanations of exemptions and practical expedients applied
Qualitative and quantitative impact on the primary statements (including the cash flow statement)
New lease accounting policy (and old accounting policy under modified retrospective approach)
Key judgements and estimates
Separate presentation of liability and asset either on face of statements or in notes
Reconciliation to operating lease commitment
Lessee disclosures
Qualitative and quantitative information about leasing activities
Total cash outflows, and potential future cash outflows not captured in lease liability
Additions to, and depreciation of, and closing carrying amount of ROU assets (by class)
A maturity analysis of lease liabilities
Interest on lease liability
Expense relating to short-term and low-value leases, and variable lease payments not included within the lease liability.
Lessor disclosures
Qualitative and quantitative information about leasing activities
Management of risks associated with ownership of underlying assets
Finance leases: selling profit/loss, finance income and income from variable lease payments
Lessors must separately analyse lease and non-lease components, e.g. common area maintenance for Property lessors
Operating lease income
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• Current consultation is being supported by impact assessments:• Number of firms have been asked to provide quantitative impacts of proposed changes.• Expected that same firms will be asked to engage in another such study in Q1 2020.
• Current consultation covers number of issues EIOPA are considering:• Q1 2020 impact study may be more reflective of expected final advice to Commission
• Number of areas where no change proposed• Consultation presents results of EIOPA investigations supporting this view
• Some areas where significant changes set out:• Extrapolation of Risk-free Rates:
• Last liquid point of Euro swap curve & potential extensions to this• Potential additional regulatory disclosures
• Interest Rate Shocks:• Move to relative shift approach.• Downward interest rate shock to become more onerous
• Volatility Adjustment Redesign• Number of options considered to redesign structure and operation
2020 Solvency II Review - EIOPA Consultations
IFRIC 23 Uncertain tax treatments
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What is an uncertain tax treatment?Tax
Means tax in scope of IAS 12.
Tax authority
All bodies that decide whether tax treatments are acceptable under tax law, including the courts.
Uncertain tax treatment
A tax treatment (used or planned to be used in tax filings) for which there is uncertainty over whether it would be accepted by the relevant tax authority under tax law – may relate to:
Past and future tax filings
Taxable income and tax deductions
Tax bases
Tax losses
Entities subject / not subject to tax
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Is it probable the tax authorities will accept the treatment?
Probable means greater than 50% chance
Assume that the tax authority would have full knowledge of all relevant information – no detection risk assumed in the assessment
Consider need for contingent liabilitydisclosures in accordance with IAS 12.88
If yes, then…
Financial statements
Tax return
=… no provision for tax uncertainty
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How to measure the uncertainty?If it’s not probable that the tax authority would accept the treatment…
Not an option - depends on whether outcome is binary or has multiple values
… whichever provides a better prediction
The most likely amount
The expected valueor
Reflect the uncertainty using…
How to measure uncertainty
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01 Amendment of accounting policies
02 Consider need to disclose additional management judgements and estimates
03 Increased disclosures on contingent liabilities
04 Increase/decrease of amount of current/deferred taxDepending on current accounting and jurisdiction:
What are the potential issues for 2019?
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• Current consultation is being supported by impact assessments:• Number of firms have been asked to provide quantitative impacts of proposed changes.• Expected that same firms will be asked to engage in another such study in Q1 2020.
• Current consultation covers number of issues EIOPA are considering:• Q1 2020 impact study may be more reflective of expected final advice to Commission
• Number of areas where no change proposed• Consultation presents results of EIOPA investigations supporting this view
• Some areas where significant changes set out:• Extrapolation of Risk-free Rates:
• Last liquid point of Euro swap curve & potential extensions to this• Potential additional regulatory disclosures
• Interest Rate Shocks:• Move to relative shift approach.• Downward interest rate shock to become more onerous
• Volatility Adjustment Redesign• Number of options considered to redesign structure and operation
2020 Solvency II Review - EIOPA Consultations
FRS 102 – Triennial amendmentsEffective accounting periods commencing on or after 1 January 2019
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Principal amendments
Financial instruments – conditions for classification as basic
Financial instruments – investments in other group entities
Definition of ‘financial institution’
Investment properties rented to other group entities
Intangible assets acquired in a business combination
Small companies regime
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Loans from directors to small entities
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Financial instruments – Investments in other group entities
Financial instruments – conditions for classification as basic
Insert text Insert text
Over-riding principle for classification of a debt instrument as basic
‘Cash flows on specified dates that constitute repayment of the principal advanced together with reasonable compensation for the time value of money, credit risk and other basic lending risks and costs’
In some cases, this will allow for debt instruments that breach the rules based conditions to still be classified as basic
Amendment also made to allow debt instruments that include reasonable compensation on early termination be consistent with basic classification (FRS 102.11.9(c))
Accounting policy choice to allow investments in another group entity that are not subsidiaries, associates or joint ventures to be measured at either:• cost less impairment• FVTPL, or• FVOCI
Principal amendments
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• Current consultation is being supported by impact assessments:• Number of firms have been asked to provide quantitative impacts of proposed changes.• Expected that same firms will be asked to engage in another such study in Q1 2020.
• Current consultation covers number of issues EIOPA are considering:• Q1 2020 impact study may be more reflective of expected final advice to Commission
• Number of areas where no change proposed• Consultation presents results of EIOPA investigations supporting this view
• Some areas where significant changes set out:• Extrapolation of Risk-free Rates:
• Last liquid point of Euro swap curve & potential extensions to this• Potential additional regulatory disclosures
• Interest Rate Shocks:• Move to relative shift approach.• Downward interest rate shock to become more onerous
• Volatility Adjustment Redesign• Number of options considered to redesign structure and operation
2020 Solvency II Review - EIOPA Consultations
IFRS 17 update
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What is coming?
June 2019Exposure draft of IFRS 17amendments issued
25 September2019Due date for comment letter to IASB
2 September2019Due date for commenting on EFRAG’s draft comment letter
Mid-2020Expected final standard
1 Jan 2021Opening balance sheet
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1 January2021
1 January2022
IFRS 17
IFRS 9for insurers
The IASB proposed to…
Document Classification: KPMG Confidential
— defer IFRS 17’s effective date by a year, and
— extend the temporary exemption from applying IFRS 9, granted to insurers meeting certain criteria
Effective date for IFRS 17
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Proposed amendments to seven areas of IFRS 17
Accounting for certain types of credit cards and loans
Accounting for investment services in an insurance contract
Allocating insurance acquisition cash flows
Mitigating the financial risk of direct participating contracts
Presentation of insurance contract assets and liabilities
Reinsurance of onerous contracts
Accounting for acquired claims liabilities on transition
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7%15% 10%
20% 9%10%
25%19%
13%
33%
30%
21%
14%
23%
35%
1% 4%10%
2018(n = 159)
2019(n = 193)
Current IFRS 17 Project Phase% of respondents
Implementation phase
Design phase
Impact assessment phase
Project start-up phase
Following the developments
Haven’t started yet
Document Classification: KPMG Confidential
Note – results not directly comparable!
• While 45% of insurers arenow in Design and Implementation mode
• A third still have not meaningfully started
Where are insurers in their preparations?Results of KPMG benchmarking survey earlier in 2019
2017(n = 81)
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% of respondentsDrilling into the current results
• The middle ground appear to have accelerated significantly
• Small insurers still need to accelerate –includes subsidiaries of major groups
Where are insurers in their preparations?Smaller insurers need to accelerate
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• Current consultation is being supported by impact assessments:• Number of firms have been asked to provide quantitative impacts of proposed changes.• Expected that same firms will be asked to engage in another such study in Q1 2020.
• Current consultation covers number of issues EIOPA are considering:• Q1 2020 impact study may be more reflective of expected final advice to Commission
• Number of areas where no change proposed• Consultation presents results of EIOPA investigations supporting this view
• Some areas where significant changes set out:• Extrapolation of Risk-free Rates:
• Last liquid point of Euro swap curve & potential extensions to this• Potential additional regulatory disclosures
• Interest Rate Shocks:• Move to relative shift approach.• Downward interest rate shock to become more onerous
• Volatility Adjustment Redesign• Number of options considered to redesign structure and operation
2020 Solvency II Review - EIOPA Consultations
Solvency II review
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2020 Solvency II review - EIOPA consultations
First consultation closed in October and considered:
• Reporting and Disclosure: General Issues, QRTs, SFCR, Financial Stability Reporting
• Insurance Guarantee Schemes
Second consultation is ongoing and considers more technical issues:
• Large consultation – core paper >700 pages.• Covers, amongst other items:• Long-term guarantee measures and measures
on equity risk• Technical provisions• Own funds• SCR & MCR• Recovery & Resolution
Directive requires that, by 1 January 2021, the European Commission review certain aspects of Solvency II. Two EIOPA consultations over 2019 to facilitate EIOPA advice to the
Commission
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Some areas where significant changes are set out:
• Extrapolation of risk-free rates: • Last liquid point of Euro swap curve & potential extensions to this• Potential additional regulatory disclosures
• Interest rate shocks:• Move to relative shift approach.• Downward interest rate shock to become more onerous
• Volatility adjustment redesign• Number of options considered to redesign structure and operation
Current consultation is being supported by impact assessments
Number of areas where no change proposed
2020 Solvency II review - EIOPA consultations
Tax Developments
Ciara WrafterDirector, Tax, KPMG Ireland
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EU Mandatory Disclosure (DAC 6)
The latest in a series of EU initiatives in the field of automatic exchange of information in tax matters (DAC 1-5) e.g. interest on financial products, EU Country-by-Country reports, etc.
DAC 6 introduces:
— an obligation on intermediaries (or taxpayers), to disclose potentially aggressive tax planning arrangements, and
— the means for tax administrations to exchange information on these structures.
Reporting of:
— cross-border arrangements.— that fall within a set of so-called “hallmarks” – some of which must be assessed in light of a main
benefit test,— within 30 days of the arrangement being made available to the taxpayer.
The scope of the Directive on Administrative Cooperation:
— all taxes of any kind with the exception of: VAT, customs duties, excise duties and compulsory social contributions, e.g. Pay Related Social Insurance (Ireland), National Insurance (UK);
— includes local financial transaction taxes, stamp duties and insurance taxes.
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Directive on Administrative Cooperation: DAC 6
Step 1
Is there a cross-border arrangement?(i.e. does it concern more than one EU Member State or a Member State and a third country?)
Step 2
Is that cross-border arrangement reportable?(i.e. does it have one of the hallmarks and, if applicable, meet the main benefit test?)
Step 3
Who has the obligation to report?
Step 4
What should be reported?
Reporting deadline: 30 days
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Entry into force: 25 June 2018
June 2017Commission proposal
13 March 2018Political agreement in ECOFIN
25 June 2018
31 December 2019Member States to adopt and publish
1 July 2020Becomes applicable with 30 day reporting deadline
31 August 2020File retroactive information
31 October 2020First information exchanged
Retroactive effect: information to be collected for reportable cross-border arrangements where the first step implemented on or after 25 June 2018: to be filed by 31 August 2020
Guidance expected from Irish Revenue end Q1/ in Q2 2020
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The hallmarksHallmark Overview – distinguishing between hallmarks linked to main benefit test and those NOT linked
Hallmarks NOT linked to the main benefit test
C.1(a) Cross-border transactions between 2 or more associated persons where deductible payment to recipient not resident anywhere
C.1(b)(ii) Cross-border transactions between 2 or more associated persons with deductible payments to recipient resident in EU Blacklist or OECD non-cooperative jurisdictions
C.2 Cross-border transactions where deductions for same depreciation on asset in more than one jurisdiction
C.3 Cross-border transactions where relief from double taxation in respect of the same item of income or capital is claimed in more than one jurisdiction
C.4 Cross-border asset transfers, material difference in the consideration amount treated as payable
D.1 Specific hallmarks concerning automatic exchange of information
D.2 Specific hallmarks concerning beneficial ownership where beneficial owner made unidentifiable
E.1-3 Specific hallmarks concerning transfer pricing: E.1 unilateral safe harbours, E.2 transfers of hard-to-value intangibles, and E.3 intra-group cross-border transfers of assets/risks/functions where significant projected reduction in EBIT for transferor/s
Hallmarks linked to the main benefit test
A.1 Condition of confidentiality
A.2 Fixed fee by reference to tax advantage
A.3 Substantially standardised documentation /available without need for substantial customisation
B.1 Contrived steps related to loss-making companies
B.2 Converting income into capital, gifts or other categories of lower taxed revenues
B.3 Circular transactions resulting in round-tripping of funds and offsetting/cancelling transactions
C.1(b)(i)(c)&(d)
Cross-border transactions where deductible payment made between 2 or more associated persons where (b)(i) the recipient jurisdiction has no tax or zero or almost zero tax rate, (c) receipt has full exemption from tax or (d) payment benefits frompreferential tax regime in the recipient’s residence jurisdiction
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The basics: when & what penalties?
— within 30 days beginning on the day after they provided, directly or by means of other persons, aid, assistance or advice.
Intermediaries under secondary definition
Intermediaries/ taxpayers: within 30 days, beginning on:
— the day after the reportable cross-border arrangement is made available for implementation to that relevant taxpayer, or
— is ready for implementation by the relevant taxpayer, or — when the first step in its implementation has been made in relation to the relevant taxpayer,
whichever occurs first.
Irish penalties:
— fixed penalties of up to €5,000 and — daily penalties of up to €500 for each day of failure to meet reporting requirements
Transfer Pricing – Key provisions in Finance Bill 2019
Nunc nec justovel felis mollisvestibulum a ac■ In practice these
guidelines already apply to transfer pricing matters under Ireland’s network of double tax treaties which follow the OECD Model Tax Convention
■ Master file requirement where annual group revenue > €250m
■ Local file requirement where annual group revenue > €50m
■ 30 day timeframe from date of request
■ Exemption where both parties to the transaction are within the charge to Irish tax
2017 OECD Guidelines
Grandfathered arrangements
Transfer Pricing
Documentation
Extension to Non-Trading Transactions
Extension to SMEs
Extension to Capital
Transactions
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Transfer Pricing Documentation
Documentation
Master file
Impact of new requirements
Local file
Penalties
OECD transfer pricing documentation requirements (in accordance with Chapter V of 2017 Guidelines) have been introduced.
The requirement to prepare a ‘master file’ (in accordance with the 2017 OECD Guidelines) is introduced for groups with consolidated revenues in excess of €250m.
New rules introduced in Ireland could trigger a requirement for MNE’s that did not previously need to prepare transfer pricing documentation to now do so.
In effect, contemporaneous transfer pricing documentation requirement introduced that did not exist previously – must be prepared by tax return filing date.
The requirement to prepare a ‘local file’ (in accordance with the 2017 OECD Guidelines) is introduced for groups with consolidated revenues in excess of €50m.
For many other countries, the revenue threshold for both master file and local file is set at €750m (or equivalent in local currency) in line with the threshold for country-by country reporting.
Requirement to deliver within 30 days of request from Revenue.
Fixed penalties - €25,000 plus €100
“Tax-geared” penalties
Are you in breach of the new Irish Master File/Local File thresholds?
Do you have any intra-group agreements, such as reinsurance or service contracts, which have been excluded from TP rules up to now because they pre-dated July 2010? If so, have you prepared TP documentation under the rules applicable to the counterparty’s jurisdiction?
Do you have a non-trading Irish FinCo within your group? Does it lend cross-border?
Do you provide parent company guarantees on a cross-border basis?
Do you have a Section 110 company in your group that lends to a non-trading Irish entity?
Do you engage in capital transactions within your group that are not tax relieved?
Points for consideration
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Anti-hybrid rules – Finance Bill 2019
Cross border arrangements between associated enterprises
Resulting in deduction without inclusion or double deduction
Mismatches arising due to unilateral transfer pricing adjustments or
notional interest deduction regimes not caught
Payments made on or after 1 January 2020
Also apply to mismatches arising from deemed payments and
profit allocations between head office and branches or between
branches
Payments subject to a nil tax outcome may not need
counteraction
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Anti-hybrid rules – types of mismatches
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Hybrid entities Residency Imported mismatches
Structured arrangements
Permanent establishment
Withholding tax
Financial instruments
Double deduction
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Finance Bill 2019 – other measures
Insurance Premium
Tax
No deductions for taxes on
income
Broadening of exit tax
provisions
Accounting periods commencing after 9 October 2019
Changes to the taxation of property
investments
Pension contributions
Capital Gains Tax groups post Brexit
Dividend withholding tax
Finance, Risk and Actuarial of the Future
Jean Rea FSAI, Director, Actuarial Services, KPMG Ireland
28 November 2019
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Timelines reducing
and increased reporting!
Cost pressures
Speed, accuracy &
confidence in reported numbers
Increased data volumes & in responsibility
for data quality
Trust by regulators,
customers & shareholders
New capabilities in financial risk & capital mgmt
Why we need to reimagine the future
42
Agile & integrated capabilities, outcomes focused
Current core processes today will become 80%+ automated
Planning, forecasting, what-if analysis will be re-built using risk and driver based approach
Insurance metrics will be produced concurrently i.e. capital will not be later
Insurance Finance closing will be continuous and forecast will be updated real time
Controls will be closed off at source and 60-70% will be automated
Planning, forecasting, reporting, analysis will be designed and executed on an integrated basis
A much changed workforce….only 1/3 of the future Finance organisation will require today’s skills
Insurance data analytics and modelling capability will evolve significantly, moving to predictive & proactive
Finance will re-organise from a task based function to a capability and outcome based function
Technology will be agile, cloud based and modular…. incorporating emerging technology, incl. automation & AI
Finance will deliver change using a hypothesis and prototyping approach
What does Finance, Risk and Actuarial look and feel like in the future ?
Much stronger foundations & efficiency in place
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A typical ORSA process…
1. Base case business plan
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2. Corresponding Solvency II projections
2
ORSA - FOCUS AREA 13. Development of the stress and scenario testing plan
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4. Solvency II projections under the assumed stresses and scenarios including reverse stress testing
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How ORSA’s are being performed has not changed materially since the introduction of the FLAOR as part of Solvency II preparations
6. Finalisation of reporting, presentation to key governance fora, ORSA opinion
55. Iterations of steps 3 and 4
All of this can take a long time!
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Digital developments further cause risks to be dynamic and interconnected
Risks are becoming even more interconnected
Risk exposures are moving more quickly,reflecting the faster pace of business
Risks have the potential tocrystallise more quickly
Incident frequency is becomingmore bulky as technology rootcauses are systemic
New technical risks are emerging
As risk management systems improve,better, more timely risk and control MIis becoming available
…In a digital world, higher emphasis will be placed on the management of connected risks
How will the tools and techniques used to assess and monitor risks change in a more connected world?
What capabilities are needed within insurers and within risk functions to manage and oversee a more connected world?
What can we learn from other parts of the business that are also impacted by changing landscapes?
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Looking beyond conventional depictions of risk based on likelihood and severity, KPMG’s Dynamic Risk Assessment (“DRA”) takes a four-dimensional (Likelihood, Impact, Velocity, and Connectivity) view of risk that allows for the contagion effect of risks — one of the most significant learnings of the Global Financial Crisis.
Next gen ORSA - risk identification
46© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
IDENTIFY RISKS
KPMG works with key stakeholders to identify the key risks facing the organization.
Focusing on systematic business risks helps produce better strategic and risk information.
SURVEY
Key stakeholders complete an online survey, for the collection of data on the characteristics of the risks facing the organization.
ANALYSIS
KPMG applies advanced network theory to the aggregated survey responses to identify the organizations interconnected risk network, and its dynamics.
REPORT
KPMG report and discuss findings with organizational stakeholders. The DRA modelling organizations to see where risks can be expected to form critical clusters or trigger ‘contagion’ with other risks.
Risk identification - DRA process
47© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
A typical ORSA process…
1. Base case business plan
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2. Corresponding Solvency II projections
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3. Development of the stress and scenario testing plan
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4. Solvency II projections under the assumed stresses and scenarios including reverse stress testing
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How ORSA’s are being performed has not changed materially since the introduction of the FLAOR as part of Solvency II preparations
6. Finalisation of reporting, presentation to key governance fora, ORSA opinion
55. Iterations of steps 3 and 4
All of this can take a long time!
ORSA - FOCUS AREA 2
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Document Classification: KPMG Confidential
© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Live Demos:― Next gen ORSA - dynamic stress and scenario testing
― QRT Analysis App
Live Demos
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Document Classification: KPMG Confidential
© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Live Demos:― Next gen ORSA - dynamic stress and scenario testing
― QRT Analysis App
Live Demos
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Agile & integrated capabilities, outcomes focused
Current core processes today will become 80%+ automated
Planning, forecasting, what-if analysis will be re-built using risk and driver based approach
Finance will produce Insurance metrics concurrently i.e. capital will not be later
Insurance Finance closing will be continuous and forecast will be updated real time
Controls will be closed off at source and 60-70% will be automated
Planning, forecasting, reporting, analysis will be designed and executed on an integrated basis
A much changed workforce….only 1/3 of the future Finance organisation will require today’s skills
Insurance data analytics and modelling capability will evolve significantly, moving to predictive & proactive
Finance will re-organise from a task based function to a capability and outcome based function
Technology will be agile, cloud based and modular…. incorporating emerging technology, incl. automation & AI
Finance will deliver change using a hypothesis and prototyping approach
What does Finance, Risk and Actuarial look and feel like in the future ?
Much stronger foundations & efficiency in place
51© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Key risk*:AI getting out of control: e.g. can we stay in control of decisions it makes?
Key risk*: AI getting decisions wrong: e.g. risk of approving/ rejecting the wrong mortgage applications
Key risk*:Lack of explainablity: e.g. how to explain this to the customer (or regulator)?
Key risk*:Gaps in corporate governance: e.g. is this in line with ethics & values?
New world… new risks
52© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
AI in Control - management framework
KPMG’s AI In Control Management framework covering 17 categories for managing risks and controls for AI solutions.
This framework is tailored for AI solutions (i.e. solutions that include machine learning capabilities).
We have identified 75 potential risksacross 17 different areas, and have defined 106 typical controls that would help manage these risks
# of risks identified, 75 in total
# of controls identified, 106 in total
Al in Control
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10
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16
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53© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
…significant barriers remain presenting new risks
NEW WORLD
OLD WORLD
But some new Risks
Enablers — Availability of data— New data infrastructure— Parallel computing— IT Bandwidth and outsourcing— New Multidisciplinary teams— New ways of working
BarriersAnchoring to:— Old systems— Old processes & controls— Old teams— Old costs of change— Low Imagination— Silos
— Gaming customers— Ownership of data— Evolving regulation— Ever-increasing complexity
of uses poorly aligned to governance and control
Questions?
Thank you
56© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland.
Contact us
Brian MorrisseyHead of InsuranceKPMG Ireland t: +353 1 410 1220e: [email protected]
Ciara Wrafter Director, TaxKPMG Ireland t: +353 1 700 4165e:[email protected]
Brian Medjaou Principal, Financial ServicesKPMG Ireland t: +353 1 700 4205e: [email protected]
Jean Rea Director, ActuarialKPMG Ireland t: +353 1 700 4288e: [email protected]
kpmg.ie
© 2019 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland.
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