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SAS® helps insurers meet IFRS 17 compliance head-on

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SAS® helps insurers meet IFRS 17 compliance head-on

New SAS® Regulatory Content for IFRS 17 software will help the industry meet shifting regulatory requirements in a single, integrated platform 

When the new International Financial Reporting Standard 17 (IFRS 17) takes effect on January 1, 2021, it will upend decades-old insurance financial reporting standards.

Though seemingly the tiniest glimmer on a distant horizon, navigating the intricacies of IFRS 17 will require painstaking planning and precision. Only insurers that act now put themselves on the best footing for success – and they now have the benefit of relying on analytics leader SAS to tackle the new standard head-on.

SAS® Regulatory Content for IFRS 17 provides for all of the requirements of IFRS 17 in one platform for users of all disciplines – actuaries, accountants and IT alike. The new solution is built on the same flexible, high-performance analytics environment that’s helping insurance firms meet Solvency II and the banking industry tackle its own regulatory disruption in IFRS 9. Key features include:

  • Predefined, comprehensive data model.
  • A powerful computation engine inclusive of IFRS 17’s required calculation methods (BBA/GMM, PAA and VFA approaches).
  • Repeatable, customizable end-to-end processes that are fully transparent and auditable.
  • Advanced financial reports with drill-down capabilities for accessing the details and source data behind the figures.
  • Seamless integration with existing accounting and actuarial solutions.

“The disparate nature of incumbent accounting systems, actuarial tools and data sources, conventionally with weak workflow and integration capabilities, will pose a significant hurdle for insurers to overcome in complying with IFRS 17, particularly as many grapple with IFRS 9 compliance in tandem,” said Cubillas Ding, Research Director at Celent. “Beyond robust analytics and calculations optimized for performance, the imperative for insurers will be to bolster the integrity, transparency and governance of relevant data supply chains in an automated and industrialized manner, yet without compromising flexibility in adapting to methodological and system changes.”

Will insurers be ready for IFRS 17?

Issued by the International Accounting Standards Board (IASB) in May 2017, IFRS 17 redefines insurers’ accounting standards in more than 100 countries. Its primary objective is to increase industry transparency by improving comparability of financial statements across organizations – how each earns profits or incurs losses through underwriting services and investing customer premiums. Whatever the compliance approach, IFRS 17 will have a significant impact on financial performance, operational processes, and data and systems.

So how are insurers reacting to the forthcoming standard? Of 100 UK-based insurance executives surveyed by SAS in early 2018, 61 percent said they have already begun preparing for its mandates, with 19 percent declaring it a top strategic priority. Eighty-three percent indicated they will need to change existing systems and processes to comply with IFRS 17. And nearly half anticipate either making additional investments (24 percent) or replacing entirely their current systems and processes (23 percent). To delve deeper into the survey results, download the report.

Tackling the biggest insurance reporting shake-up in decades

IFRS 17 will bring greater complexity to insurers’ accounting practices and require a complete overhaul of the workflow between actuaries, risk managers and accounting. Forward-thinking insurers aren’t wasting any time on the road to compliance.

German financial group Wüstenrot & Württembergische (W&W), for example, has long relied on SAS’ risk management and data quality solutions to help it meet banking regulations and compliance requirements. Now facing the regulatory upheaval of IFRS 17 in its insurance business, W&W is expanding its SAS footprint and analytic capabilities to create a risk management platform that complies with the latest regulatory requirements.

“To meet IFRS 17 requirements, W&W needs a solution that automates the end-to-end processes for data import, makes calculations using the relevant IFRS 17 methods and creates the essential, granularly auditable accounting records,” says Carmen Hess, Senior Project Manager at W&W Informatik GmbH. “The SAS solution ticks all those boxes while also fostering greater cohesion and cooperation between the accounting, actuarial and IT departments via a unified, customizable platform.”

HDI Seguros, the Mexican branch of Hannover, Germany-based HDI Global Insurance Company, is another company investing strategically in analytic tools for IFRS 17 compliance.

“Introducing new functions in the framework of IFRS 17’s regulatory requirements led us to acquire the SAS risk solution, with which we also cover our own objectives in the areas of financial planning, claims, pricing and analytics for greater business intelligence,” said Mauro Soria, Actuary Director of HDI Mexico. “We believe that market-leading analytical technology is important to ensuring that we will maintain a good role in the face of regulatory entities and, at the same time, continue to optimize our business.”

A once-in-a-lifetime change in insurance accounting: Where to start?

To learn more about how SAS is helping organizations prepare for the new insurance accounting paradigm, register for the on-demand webinar, IFRS 17: Turning Compliance Into an Opportunity. From defining an overall strategy to the essential implementation steps, SAS experts summarize what insurers need to know to jump-start their journey to IFRS 17 compliance.

“January 2021 seems far way, but keep in mind that insurers will be expected to present comparative results in 2020 based on 2019 data. That means most of the implementation and training should already be done by that time,” said Troy Haines, Senior Vice President and head of the risk management division at SAS. “Whatever an organization’s current level of readiness, the time to take action is now.”

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 1

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices fell from recent highs for a second day on Friday as Texas energy firms began to prepare for restarting oil and gas fields shuttered by freezing weather.

Brent crude futures were down $1.16, or 1.8%, to $62.77 per barrel, by 1150 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell $1.42, or 2.4%, to $59.10 a barrel.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, according to analysts.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

However, firms in the region on Friday were expected to prepare for production restarts as electric power and water services slowly resume, sources said.

“The market was ripe for a correction and signs of the power and overall energy situation starting to normalise in Texas provided the necessary trigger,” said Vandana Hari, energy analyst at Vanda Insights.

Oil fell despite a surprise fall in U.S. crude stockpiles in the week to Feb. 12, before the freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about both nations returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons.

While the thawing relations could raise the prospect of reversing sanctions imposed by the previous U.S. administration, analysts did not expect Iranian oil sanctions to be lifted anytime soon.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” StoneX analyst Kevin Solomon said.

(Additional reporting by Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; editing by Jason Neely)

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies 2

By Douglas Busvine and Christoph Steitz

BERLIN (Reuters) – The semiconductor crunch that has battered the auto sector leaves carmakers with a stark choice: pay up, stock up or risk getting stuck on the sidelines as chipmakers focus on more lucrative business elsewhere.

Car manufacturers including Volkswagen, Ford and General Motors have cut output as the chip market was swept clean by makers of consumer electronics such as smartphones – the chip industry’s preferred customers because they buy more advanced, higher-margin chips.

The semiconductor shortage – over $800 worth of silicon is packed into a modern electric vehicle – has exposed the disconnect between an auto industry spoilt by decades of just-in-time deliveries and an electronics industry supply chain it can no longer bend to its will.

“The car sector has been used to the fact that the whole supply chain is centred around cars,” said McKinsey partner Ondrej Burkacky. “What has been overlooked is that semiconductor makers actually do have an alternative.”

Automakers are responding to the shortage by lobbying governments to subsidize the construction of more chip-making capacity.

In Germany, Volkswagen has pointed the finger at suppliers, saying it gave them timely warning last April – when much global car production was idled due to the coronavirus pandemic – that it expected demand to recover strongly in the second half of the year.

That complaint by the world’s No.2 volume carmaker cuts little ice with chipmakers, who say the auto industry is both quick to cancel orders in a slump and to demand investment in new production in a recovery.

“Last year we had to furlough staff and bear the cost of carrying idle capacity,” said a source at one European semiconductor maker, who spoke on condition of anonymity.

“If the carmakers are asking us to invest in new capacity, can they please tell us who will pay for that idle capacity in the next downturn?”

LOW-TECH CUSTOMER

The auto industry spends around $40 billion a year on chips – about a tenth of the global market. By comparison, Apple spends more on chips just to make its iPhones, Mirabaud tech analyst Neil Campling reckons.

Moreover, the chips used in cars tend to be basic products such as micro controllers made under contract at older foundries – hardly the leading-edge production technology in which chipmakers would be willing to invest.

“The suppliers are saying: ‘If we continue to produce this stuff there is nowhere else for it to go. Sony isn’t going to use it for a Playstation 5 or Apple for its next iPhone’,” said Asif Anwar at Strategy Analytics.

Chipmakers were surprised by the panicked reaction of the German car industry, which persuaded Economy Minister Peter Altmaier to write a letter in January to his counterpart in Taiwan to ask its semiconductor makers to supply more chips.

No extra supplies were forthcoming, with one German industry source joking that the Americans stood a better chance of getting more chips from Taiwan because they could at least park an aircraft carrier off the coast – referring to the ability of the United States to project power in Asia.

Closer to home, a source at another European chipmaker expressed disbelief at the poor understanding at one carmaker of how it operates.

“We got a call from one auto maker that was desperate for supply. They said: Why don’t you run a night shift to increase production?” this person said.

“What they didn’t understand is that we have been running a night shift since the beginning.”

NO QUICK FIX

While Infineon, the leading supplier of chips to the global auto industry, and Robert Bosch, the top ‘Tier 1’ parts supplier, both plan to commission new chip plants this year, there is little chance of supply shortages easing soon.

Specialist chipmakers like Infineon outsource some production of automotive chips to contract manufacturers led by Taiwan Semiconductor Manufacturing Co Ltd (TSMC), but the Asian foundries are currently prioritising high-end electronics makers as they come up against capacity constraints.

Over the longer term, the relationship between chip makers and the car industry will become closer as electric vehicles are more widely adopted and features such as assisted and autonomous driving develop, requiring more advanced chips.

But, in the short term, there is no quick fix for the lack of chip supply: IHS Markit estimates that the time it takes to deliver a microcontroller has doubled to 26 weeks and shortages will only bottom out in March.

That puts the production of 1 million light vehicles at risk in the first quarter, says IHS Markit. European chip industry executives and analysts agree that supply will not catch up with demand until later in the year.

Chip shortages are having a “snowball effect” as auto makers idle some capacity to prioritize building profitable models, said Anwar at Strategy Analytics, who forecasts a drop in car production in Europe and North America of 5%-10% in 2021.

The head of Franco-Italian chipmaker STMicroelectronics, Jean-Marc Chery, forecasts capacity constraints will affect carmakers until mid-year.

“Up to the end of the second quarter, the industry will have to manage at the lean inventory level,” Chery told a recent Goldman Sachs conference.

(Douglas Busvine from Berlin and Christoph Steitz from Frankfurt; Additional reporting by Mathieu Rosemain and Gilles Gillaume in Paris; Editing by Susan Fenton)

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Aussie and sterling hit multi-year highs on recovery bets

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Aussie and sterling hit multi-year highs on recovery bets 3

By Tommy Wilkes

LONDON (Reuters) – The Australian dollar rose to near a three-year high and the British pound scaled $1.40 for the first time since 2018 on optimism about economic rebounds in the two countries and after the U.S. dollar was knocked by disappointing jobs data.

The U.S. currency had been rising in recent days as a jump in Treasury yields on the back of the so-called reflation trade drew investors. But an unexpected increase in U.S. weekly jobless claims soured the economic outlook and sent the dollar lower overnight.

On Friday it traded down 0.3% against a basket of currencies, with the dollar index at 90.309.

The Aussie rose 0.8% to $0.784, its highest since March 2018. The currency, which is closely linked to commodity prices and the outlook for global growth, has been helped by a recent rally in commodity prices.

The New Zealand dollar also gained, and was not far off a more than two-year high, while the Canadian dollar rose too.

Sterling rose to $1.4009 on Friday, an almost three-year high amid Britain’s aggressive vaccination programme.

Given the size of Britain’s vital services sector, analysts say the faster it can reopen the economy, the better for the currency. Sterling was also helped by better-than-expected purchasing managers index flash survey data for February.

The U.S. dollar has been weighed down by a string of soft labour data, even as other indicators have shown resilience, and as President Joe Biden’s pandemic relief efforts take shape, including a proposed $1.9 trillion spending package.

Despite the recent rise in U.S. yields, many analysts think they won’t climb too much higher, limiting the benefit for the dollar.

“Our view remains that the Fed will hold the line and remain very cautious about tapering asset purchases. We think it will keep communicating that tightening is very far off, which should dampen pro-dollar sentiment,” said UBS Global Wealth Management strategist Gaétan Peroux and analyst Tilmann Kolb.

ING analysts said “the rise in rates will be self-regulating, meaning the dollar need not correct too much higher”.

They see the greenback index trading down to the 90.10 to 91.05 range.

U.S. dollar

Aussie and sterling hit multi-year highs on recovery bets 4

The euro rose 0.4% to $1.2134. The single currency showed little reaction to purchasing manager index data, which showed a slowdown in business activity in February. However, factories had their busiest month in three years, buoying sentiment.

The dollar bought 105.39 yen, down 0.3% and a continued retreat from the five-month high of 106.225 reached Wednesday.

(Editing by Hugh Lawson and Pravin Char)

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