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Insurance Agenda - Capital, risk and regulation - EY - Australia

Capital, risk and regulation

Risk and capital management functions are facing significant challenges. Against a wave of regulatory reform and highly uncertain macro-economic trends, getting the right balance between capital levels, ROE and growth has never been more important.

Although insurers recognise that much of the reforms are needed and will bring positive benefits to consumers and the industry, the cost burden of implementing such reforms are significant.

We can help insurers navigate through such reforms. Improving the way risk based-decisions are made and how capital can be allocated more effectively in order to strengthen risk and capital management capabilities and increase performance in a highly competitive environment are often leveraged from learning’s offshore, notably Solvency II, but critically recognise the nuances of the local market.

FATCA is not just another global change programme. It is the first tax provision to require uniform global change, impacting your customer interaction with a fixed deadline.

In our August 2011 edition of Insurance Agenda we outlined how the Foreign Account Tax Compliance Act (FATCA) would potentially impact insurance companies. Following the release of the FATCA draft regulations in February 2012, this edition of Insurance Agenda confirms what the regulations mean for life and general insurers; what concessions have been granted; and what insurers need to do now in order to become FATCA compliant.

While it is important to understand FATCA and its impact, it is critical that the requirements be operationalised to minimise its impact on the business and manage the customer experience. The timeframes before commencement of the rules require insurance companies to start their FATCA programs now.

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Turning risks into results - How leading companies use risk management to fuel better performance
From Enron and WorldCom to the more recent financial crisis, events of the last decade have fundamentally shifted how organizations think about risk. Companies around the world have made substantial investments in personnel, processes and technology to help mitigate and control business risk. Historically, these risk investments have focused primarily on financial controls and regulatory compliance. A strategic question presents itself: “Do organizations with more mature risk management practices outperform their peers financially?”

Leading the way: improving performance, managing risk - 2012 Executive and Board Remuneration Report - Executive summary
In EY’s 2012 Executive and Board Remuneration Report, we draw on our experience advising almost two-thirds of the ASX 200 companies in the last two years to comment on the key issues affecting executive and board remuneration in 2012. We also present our analysis of senior executive and non-executive director remuneration practices within the 100 largest companies of the ASX 200 in the last year.

Eurozone Forecast: Outlook for Financial Services Spring 2012
The financial environment has experienced some improvement in recent months. Greece has adopted a debt restructuring package that has kept the Eurozone and its financial system intact, while the European Central Bank’s (ECB) longer-term refinancing operation (LTRO), has helped avoid a severe credit crunch across the region. Despite this positive action, the economy still faces significant challenges this year - namely, stringent fiscal austerity, tight credit and rising unemployment.

APRA's draft capital standards: The transition begins now
The December release of APRAs draft capital standards are a further step in APRA’s aim of harmonising the basis for determining regulatory capital requirements across the various components of the financial services industry in Australia. The changes also bring the basis for Australian insurers closer to those being developed overseas.

We summarise our views on the release from APRA , as well as discussing the key next steps for insurers given the limited time available for implementation of the new regime.

LAGIC’s reforms to the insurance concentration risk charge
APRA’s proposed changes to the insurance concentration risk charge (ICRC), particularly the requirement to hold capital against several smaller losses, will have a significant impact on insurers’ prudential capital requirements, and consequently on their reinsurance programmes.

Facing the challenge: business implications of IFRS 4, 9 and Solvency II for insurers
Insurers face a huge challenge in synchronizing the implementation of IFRS 4 Phase II with IFRS 9 in the coming years. Managing the timelines and interdependencies between these frameworks, along with other new IFRS standards, Solvency II and other finance transformations and change programs that may be underway will place many companies in a conflicting position.

Insurance Agenda - Effective risk management in insurance companies
In this edition, we examine the effectiveness of risk management in meeting the expectations of CEOs and CROs. Business leaders are continually on the lookout for ways to improve the effectiveness of their business operations. We therefore explore some of the emerging issues and challenges in making these necessary adjustments value adding to the overall business.

IFRS 10 Consolidated Financial Statements: an insurer's perspective
In this issue we outline the challenges that are likely to face insurers under IFRS 10 Consolidated Financial Statements and advise on preparing for these challenges.

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    Actuarial Services
    Tel: +61 2 9248 4484

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