FSC Discusses Improvements to LAT for IFRS 17 Implementation
FSC held the third meeting of “Advancement Group for Insurance Capital Soundness.” At the meeting, the participants discussed system improvements in preparation for the implementation of IFRS 17 on insurance contracts; the discussions covered the improvement of the liability adequacy test, or LAT, and the establishment of the Financial Soundness Reserve. The changes to the liability adequacy test are intended to actively induce insurers to raise capital in preparation for the implementation of IFRS 17.
According to the notification, "the liability adequacy test is being operated to induce debts to be prepared in advance" for the market price evaluation of insurance liabilities due to IFRS 17. The IFRS 17 implementation has changed the cost method, which used to discount insurance liabilities at historical interest rates, to the current price method, which is discounted at interest rates. It is necessary to examine how to raise capital in preparation for the implementation of IFRS 17 if the profit or loss of insurers is sensitive to interest rate fluctuations.
Related Link (in Korean): Press Release
Keywords: Asia Pacific, Korea, Insurance, IFRS 17, LAT, Current Price Method, Insurance Contracts, Liability Adequacy Test, FSC
Featured Experts
Gavin Conn
Experienced life actuary; background in economic capital modeling; ALM specialist; IFRS 17 researcher
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Cassandra Hannibal
IFRS 17 subject matter expert; actuary; risk management and capital projection specialist
Previous Article
BaFin Publishes Form and Guide for Less Significant InstitutionsNext Article
EBA Publishes Work Program for 2020Related Articles
HKMA on Fintech Adoption and Innovation by Banks in Hong Kong
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS on Impact of Increasing Use of Cloud Technology on Cyber Risk
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB Consults on Guide for Managing Climate and Environmental Risks
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB Issues Opinion on Revisions to CRR in Response to COVID Crisis
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA Assesses Interlinkages Between Recovery and Resolution Planning
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB Publishes Final MREL Policy Under the Banking Package
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
EIOPA Risk Assessment Shows Increase in Credit and Market Risks
EIOPA published its risk dashboard based on Solvency II data from the fourth quarter of 2019.
MNB Issues Statement on Loan Payments After Moratorium Expires
MNB published a statement on loan payments post the announced moratorium, in addition to a set of new questions and answers (Q&A) on supervisory measures and requirements announced amid COVID-19 pandemic.
EBA Single Rulebook Q&A: Second Update for May 2020
EBA updated the Single Rulebook question and answer (Q&A) tool for banks.
US Agencies Temporarily Amend Supplementary Leverage Ratio Calculation
US Agencies (FDIC, FED, and OCC) published an interim final rule that temporarily revises the supplementary leverage ratio calculation for depository institutions.
