Financial Services Commission Strengthens Senior Actuaries' Authority and Independence Ahead of IFRS17

Strengthening Management and Supervision to Enhance Capital Adequacy

[Asia Economy Reporter Jin-ho Kim] Starting from January next year, the new International Financial Reporting Standard (IFRS17) will be implemented, and measures will be taken to strengthen the authority and independence of the appointed actuary to ensure faithful operation in accordance with international standards. Additionally, management and supervision will be conducted to help insurance companies solidify their capital in preparation for IFRS17.

The Financial Services Commission announced on the 4th that it will publicly notify the amendment bill of the "Insurance Business Act Enforcement Decree and Enforcement Rules" based on these contents.

First, the appointed actuary system will be improved. With the introduction of IFRS17, the importance and complexity of actuarial work have increased due to the expanded range of changes in reserves based on actuarial assumptions, but concerns about the responsibility and independence of the appointed actuary have been reflected.

The Financial Services Commission plans to strengthen the guarantee of authority and independence to ensure that IFRS17 operates in accordance with international standards. Specifically, it will require attendance and reporting to the board of directors at least once a year regarding financial soundness, establish separate compensation and evaluation criteria not linked to financial management performance, and strengthen appointment and dismissal procedures.

With the introduction of IFRS17, terminology in financial statements will also change. The balance sheet will be renamed the statement of financial position, and the income statement will be changed to the statement of comprehensive income, among others.

The concept of reserves, defined as liabilities under the "cost evaluation" method, will be redefined as the "present value at the valuation date." The evaluation and impairment criteria for reinsurance assets will also reflect IFRS17 standards, stipulating that both primary insurers and reinsurers evaluate reserves separately. In cases of expected insolvency of reinsurers, future expected losses will also be reflected in impairment processing.

With the introduction of the new solvency regime (K-ICS), the concept of capital loss absorbency will be reflected in the solvency amount (available capital), and the definition of the solvency capital requirement (required capital) will be refined as the risk of potential losses.

A Financial Services Commission official explained, "We will complete the public notification by the 16th of next month and proceed with regulatory and legislative reviews to finalize the amendments in the second half of the year," adding, "We will also strengthen management and supervision to help solidify capital in preparation for the introduction of IFRS17."

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