How ILS delivers first- and second-line actuarial functions
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In a nutshell
Our Life team (Insight Life Solutions) is working with a growing life insurer in South Africa that offers a standard suite of long-term insurance products. We took over the outsourced first- and second-line actuarial functions in June 2023, and as part of this, have assisted the insurer with the following since take-on:
- The calculation of the SAM Technical Provisions and Solvency Capital Requirement (SCR) on a quarterly and annual basis;
- The completion of the SAM quarterly and annual quantitative returns (QRT) and the annual qualitative return (QRR);
- ORSA scenario modelling;
- IFRS 17 implementation and reporting;
- New product development and amendments to existing product features and pricing.
Having an outsourced actuarial function enables the insurer to focus on meeting their strategic objectives, confident that the right things are being done and that any urgent issues will be flagged quickly.
How we did it
Our first-line team:
- Acquired the existing IFRS 4 and SAM models and reporting templates from the previous first-line team and arranged sessions where they demonstrated how the models operate and produce results.
- Acquired prior year financial and solvency results and replicated the models to ensure that the March 2023 results could be reproduced from these models.
- Successfully migrated the insurer’s existing cash flow models from Excel to a single Mo.net model, which is now used for financial and regulatory reporting.
- Built an Excel-based IFRS 17 model that produces the liability for remaining coverage and liability for incurred claims for all IFRS 17 insurance and reinsurance groups. The client has used this model for IFRS 17 reporting since the December 2023 valuation.
- Made other refinements to the existing SAM models to improve efficiencies and ensure the accuracy of the underlying calculations.
- Supported the HAF and other insurance functions in completing various ad hoc activities throughout the year, such as process improvement, documentation, policy reviews, premium rate reviews, input into new product launches, and input into risk management activities.
Our second-line team (Head of Actuarial Function / HAF):
- Read all available valuation and audit reports during the take-on phase and reviewed any relevant documentation or findings recommended by the Board and senior management team.
- Submitted written reports to the Board explaining the financial and solvency position at each quarter-end and the year-end and provided necessary information to the CFO so that an integrated financial report could be presented to the Board.
- Actively engaged in the ORSA scenario setting process and independent review of financial results produced by the first-line team.
- Independently reviewed the SAM-related activities carried out by our first-line team, compliant with the Fit and Proper requirements of GOI 4 (required for the life practising certificate).
Benefits of outsourcing first- and second-line actuarial functions to Insight
- Insight has regular catchups with the insurer, to keep them up to date with any issues, progress, or decisions made. This enables us to keep the communication lines open and build relationships with our clients.
- Insight has a life practising certificate holder and several actuaries working towards their own certificates, ensuring a steady and increasing supply of HAF services over time.
- Our internal reporting lines for first- and second-line functions are separate. For example, our first-line consultants do not report to our practising certificate holder(s), which contributes to independence between the two functions.
- We have access to the broader Insight expertise, allowing us to bring in subject matter experts as we need them instead of having them as core members of the first-line team. With this client, for example, we brought in Mo.net developers to migrate the Excel models into Mo.net, IFRS 17 experts to assist with the IFRS 17 build, etc. This gives our clients access to the expertise they need in a cost-effective way.
- Since Insight does not offer audit services, we can avoid future conflicts of interest since we can’t audit our clients. This ensures continuity in the services that we provide.
What did the life insurer have to say about it?
“We were pleasantly surprised by the speed of transitioning, which was our concern when we started onboarding Insight and Mo.net. We were very impressed by the Insight team and the expertise presented. As we started working together, we have found the team is very well organised, plans ahead of time for every task and has positive engagement.”
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By Christelle Oosthuizen
