Insights into

IFRS Insurance
IFRS 4 Phase II and
IFRS 9 Alignment
With Solvency II

Contents
IFRS 4 Phase II and IFRS 9 alignment with Solvency II

Impacts of IFRS changes on the Solvency II Pillars

Pillar 1

Pillar 2

Pillar 3

Our experienced IFRS Insurance team

Global IFRS Insurance Team

Belgium

France

Germany

Ireland

Italy

Luxembourg

Netherlands

Finland

Norway

Sweden

Spain

Switzerland

UK

Canada

Africa - Western Central

Africa - South

Central Europe

Korea

Cyprus

Iceland

Israel

Japan

Middle East

Contact details for further information on this factsheet

About Deloitte

IFRS 4 Phase II and IFRS 9

alignment with Solvency II
We consider the following eight factors to be key factors when considering Solvency II
alignment with IFRS.

External financial
and regulatory
reporting

Whilst elements of the traditional revenue account presentation remain under the new IFRS
requirements, the mechanics of recognition have significantly changed to a margin-based approach.
The profit and loss attribution under Solvency II is similar but the principle of profit recognition in
IFRS (profit is recognised with the fulfilment of the obligations under the in-force policies) is different
from the principle of surplus recognition under Solvency II (measured on an hypothetical exit value
of the in-force policies). This key difference requires appropriate processes and controls and
additional modelling for the IFRS profit.

Compliance
Activities

Currently IFRS permits different valuations of insurance liabilities within the same group. This will
terminate with the new IFRS for Insurance and will introduce a new meaning for valuation
compliance.

Strategy and
Governance

The management of both assets and liabilities form an integral part of a companys strategy for both
profit and capital volatility management. Early planning could be required given the high potential for
the new IFRS financial instrument standard mandating adoption ahead of the new IFRS insurance
standards.

Incentivisation and remuneration of employees will need to be recalibrated within the Solvency II and
IFRS frameworks as well as the wider entity level strategy and governance structures.

People and
Culture

Educating both management and staff on how an insurers success is measured under both Solvency
II and IFRS will require a significant investment in training that will enable the alignment of behaviours
to the new capital and profit metrics.
Additionally, we need to consider organisational implications in terms of culture, changes to peoples
roles and responsibilities and rewards and benefits.

6 May 2013

Insurers will need to consider how and what to communicate for the revised IFRS profit targets and
consider the level of linkage with future strategic risk appetite

Market Reporting

The ability to frequently understand and monitor the drivers of the changes between the two bases will
be key to ensure transparency to external as well as internal stakeholders.

There will be additional pressure to the existing Solvency II timescales to produce simultaneously, the

Process

Data

IFRS statements and disclosures to permit sufficient time to analyse and reconcile the results.

The data requirements for IFRS and Solvency II overlap. However IFRS introduces data that was not
contemplated in the Solvency II data model and requires similar parameters to be calibrated differently.

Cost hierarchies and cost allocation systems will need updating to provide an appropriate level of
direct acquisition costs incurred at portfolio level, as well as the separation of any overhead elements
between the liability valuation bases.

Systems

6 May 2013

Additionally, developing a residual margin amortisation model which can be updated at each reporting
date will have significant system implications, especially as no equivalent base exists under Solvency
II.

Impacts of IFRS changes on the

Solvency II Pillars
The most significant impacts of IFRS on Solvency II will be:

Pillar 1

Refinement of the Solvency II calculations.

New calculations (e.g., Residual margin).

Flexibility around existing systems to meet IFRS Insurance requirements (e.g., insurance vs
investment contracts scoping, direct acquisition costs).

New systems.

Target Operating Model (TOM) and WDT impacts layered onto Solvency II and the need for robust
reconciliations (Solvency II to IFRS).

Liability data requirements are likely to be more granular than those for Solvency II.

Increased need for scarce and costly resources (e.g., Actuarial).

Pillar 2

Minimal impact due to IFRS. The economic balance sheet offers under Pillar 2, greater similarities to
IFRS valuation than the Pillar 1 balance sheet. This is due to the more limited regulatory
requirements on the parameters used for the Pillar 2 economic balance sheet.

All of the impacts will influence the design of the TOM affecting process, data and technology.

Pillar 3

6 May 2013

New reporting requirements for IFRS could be built onto/alongside the Solvency II reporting
requirements.

Our experienced IFRS

Insurance team
Global IFRS Insurance Team
Deloitte has proven experience delivering common data models and storage infrastructure. We have
experience working with a number of organizations to define and implement insurance data solutions for
IFRS. Deloitte is uniquely positioned to serve as your partner.

May 13

Belgium
Dirk Vlaminckx
dvlaminckx@deloitte.com
+ 322 8002 146

France
Jerome Lemierre
jlemierre@deloitte.fr
+ 331 5561 4078

Germany
Frank Engelender
fengelaender@deloitte.de
+ 492 1187 722402

Ireland
Glenn Gillard
ggillard@deloitte.ie
+ 353 1417 2802

Italy
Andrea Paiola
apaiola@deloitte.it
+ 390 1155 97204

Luxembourg
Thierry Flamand
tflamand@deloitte.lu
+ 352 45145 4920

Netherlands
Hans de Witt
HdeWitt@deloitte.nl
+ 318 8288 4235

Finland
Martin Faarborg
mfaarborg@deloitte.dk
+ 452 1276 558

Norway
Eivind Skaug
eskaug@deloitte.no
+ 472 3279 355

Sweden
Goran Engquist
gengquist@deloitte.se
+ 467 5246 2194

Spain
Jordi Montalbo
jmontalbo@deloitte.es
+ 34 93 280 4040

Switzerland
Sabine Betz
sbetz@deloitte.ch
+ 415 8279 6881

UK
Francesco Nagari
fnagari@deloitte.co.uk
+ 44 20 7303 8375

Canada
Neil Harrison
nharrison@deloitte.ca
+ 1 416 601 6307

Africa - Western Central

Oduware Uwadiae
ouwadiae@deloitte.com
+ 234 8056 018887

Africa - South
Yuresh Maharaj
ymaharaj@deloitte.co.za
+ 271 1209 6204

Central Europe
Dariusz Szkaradek
dszkaradek@deloittece.com
+ 482 2511 0331

Korea
Lee, Jae Seog
jaeslee@deloitte.com
+ 822 6676 1162

Cyprus
Andreas Andreou
aandreou@deloitte.com
+ 357 2236 0686

Iceland
Thorsteinn Gudjonsson
Thorsteinn.Gudjonsson@deloitte.is
+ 354 580 3087

Japan
Arata Otake
arata.otake@tohmatsu.co.jp
+ 819 0603 58857

Middle East
Samir Madbak
smadbak@deloitte.com
+ 971 6574 1052

Israel
Ran Feldboy
rfeldboy@deloitte.co.il
+ 972 3608 5478

Contact details for further

information on this factsheet

Louis Jordan
Vice Chairman of Deloitte UK
Louis is responsible for establishing our Insurance Practice here in the UK and was the
Global Head of Insurance across the firm. Louis is the Global Lead Client Service Partner
on two of our largest financial services clients and leads the Deloitte EMEA Solvency II
and IFRS practices across EMEA. He has over twenty years of experience in consulting to
financial services companies. Louis major areas of expertise is in the arena of Business
Transformation, Cost Reduction and Merger & Acquisition. Contact: Louis Jordan
ljordan@deloitte.co.uk +44 20 7303 8284

Francesco Nagari
Global IFRS Insurance Lead Partner
Francesco Nagari is a partner in Deloitte LLP based in London and took the position of
Global IFRS Insurance Leader in October 2008. In that capacity he is a member of the
London IFRS Centre of Excellence of Deloitte. He qualified in Italy as dottore
commercialista (1991) and revisore contabile (1995) and a chartered accountant in the UK
with the ICAEW (2011). He speaks Italian, English, French and Portuguese. Contact:
Francesco Nagari fnagari@deloitte.co.uk +44 20 7303 8375 More

Michel de la Bellire
EMEA Solvency II Lead Partner
Michel de la Bellire re-joined Deloitte in 2006, having previously worked for Deloitte
Consulting between 1995 and 2003. He brings more than 17 years of experience in
consulting for the insurance industry in France and in the US. His clients include some of
the largest insurers on the French market. He has worked both in the P&C and health &
life segments, for insurers as well as brokers. In addition to leading Deloittes Solvency II
Initiative in France, Michel chairs Deloittes European Solvency II Working Group. Contact:
Michel de La Bellire mdelabelliere@deloitte.fr : +33 (0) 1 40 88 29 95 More

Francesca Smith
Global Solvency II and IFRS Insurance Lead Director
Francesca Smith is a Board level strategic change management director. She has
extensive experience leading strategy and large scale complex change working at Board
level. Francesca was a finalist in The Sunday Times Women in Business Competition
and is an alumna of Cambridge University and the Harvard Business School. Contact
details: Francesca Smith frsmith@deloitte.co.uk +44 7909 888 535 More

May 13

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