Description: The implementation of the IFRS 17 insurance accounting standard has brought significant changes to the financial reporting landscape of insurance companies. With new disclosure requirements and altered profit analysis, understanding and interpreting future profitability have become a topic of concern for the industry. While stability remains a key objective for insurance companies, the earning patterns might become more volatile especially when the contractual service margin (CSM) is exhausted, and a loss component (LC) needs to be established. Reinsurance, a common risk mitigation tool, can play a pivotal role in managing earnings volatility and minimizing losses for onerous measurement units. In this article, we propose a new key performance indicator (KPI) called “loss recoverability” to assess the performance of reinsurance treaties in achieving these objectives. We explain how this KPI can be utilized in multiple scenarios to evaluate the effectiveness of reinsurance strategies and pursue stability in earning patterns.

Description: This article is an abstract of the Deloitte whitepaper “Financial KPIs in the New World” that will be published in January 2023. It provides a market view of how the new Financial KPIs will be integrated in the insurers’ decision-making process and about the main challenges and opportunities for insurers’ management and external stakeholders in the jurisdictions that have adopted IFRS17 and in particular countries in the EMEA region.

Description: The Federal funds rate increased by 4.25% in 2022 with further increases in 2023, which have already resulted in a liquidity crisis for a few banks. As the rapid increase of the interest rates pushed the new money rates above the yields of many life insurers’ investment portfolios, insurance companies are facing a dilemma between compressed margins from peer pressure and the concern with liquidity shortfalls and realized capital losses should mass surrenders happen. This paper discussed main emerging risks under rising interest rate environment, and several ways to mitigate these risks.

Description: Over a short span of two weeks, the financial system has observed the collapse of two mid-sized U.S. commercial banks, California-based Silicon Valley Bank (“SVB”) and New York-based Signature Bank, and a takeover of troubled Credit Suisse by a rival in Europe. Other banks that serve a similar demographic as SVB, such as First Republic Bank and PacWest Bancorp, have also experienced an elevated level of customer deposit withdrawals while their stock prices plummeted. The U.S. Federal Deposit Insurance Corporation (FDIC) quickly stepped in and guaranteed all deposits from the failed banks to prevent a broader crisis in the banking system. The current turmoil in the financial system is a stark reminder of the importance of effective risk management and regulation.

Description: The Federal funds rate increased by 4.25% in 2022 with further increases in 2023, which have already resulted in a liquidity crisis for a few banks. As the rapid increase of the interest rates pushed the new money rates above the yields of many life insurers’ investment portfolios, insurance companies are facing a dilemma between compressed margins from peer pressure and the concern with liquidity shortfalls and realized capital losses should mass surrenders happen. This paper discussed main emerging risks under rising interest rate environment, and several ways to mitigate these risks.