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Risk Adjustment under
IFRS 17

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About the Paper
 

Risk Adjustment (RA) corresponds to the compensation that the insurance entity requires for bearing the uncertainty about future cash flows related tonon-financial risks.

The RA has a very strong impact on the valuation of future profits and the IFRS result of the contracts in the portfolio.

The RA as defined in the IFRS 17 framework is a quantity conceptually close to the Risk Margin in the Solvency II  environment, although differences remain in the calculation of these elements.

In the latest version of the standard published on 18 May 2017, only general principles for calculating the RA are explained; therefore different approaches are possible to assess it.


 

2 major issues arise for (re)insurance companies who are currently structuring their RA estimation methodologies.
 

  • Which approach offers the greatest flexibility for managing IFRS results?
  • How to use Solvency II calculations to avoid multiplying IFRS 17 and Solvency II production work?


Ultimately, the RA offers a great opportunity for insurance companies to fully exploit their ERM (Enterprise Risk Management) corpus, as the Solvency II framework has enabled them to make considerable progress in this area.

 

What you'll find in the Paper

Our paper covers:

  • What is Risk Adjustment?
  • Operational impact of Risk Adjustment on IFRS 17 KPIs
  • Diversification and Risk Adjustment allocation issues

 

  • IFRS 17 Risk Adjustment vs Solvency II Risk Margin
  •  Risk Adjustment and R&D opportunities within IFRS 17

 

Our addactis Experts

This publication was produced under the direction of:

Laurent DEVINEAU
Partner
Chief Innovation Officer
Deputy CEO ADDACTIS France

 


With addactis® experts in France:

Marielle DE LA SALLE
Partner
Business & Innovation Advisor


Benjamin POUDRET
Partner
Head of Modeling & Risk P&C


Franck-Olivier BAGONNEAU
Consultant

Jérôme SOUVANTHONG
Consultant

David MARIUZZA
Partner
Head of Modeling & Finance


Philippe-Antoine JUSSIAUX
Senior Manager

Khady SALL
Consultant

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