Page 34 - Annual Report 2019

31 ANNUAL REPORT 2019 SUPERVISION AND AUTHORISATION

Insurance Supervision Claims management International Financial Reporting
In 2019, the Insurance Supervision team, responsible The thematic review of claims management by QFC Standard (IFRS) 17 (insurance contracts)
for 21 insurers and insurance intermediaries, insurers conducted in 2019 included an assessment In October 2019, the Regulatory Authority conducted a
conducted thematic reviews, assessed and analysed of firms’ practices, policies, procedures, systems and survey to measure the preparedness of QFC insurance firms
prudential returns and conducted risk assessment controls in relation to management of insurance claims. in relation to IFRS 17, which replaces IFRS 4 in January 2022.
visits, all important activities in the Regulatory A primary finding of the review was the lack of appropriate The results of the survey were collated and analysed in a
Authority’s risk-based approach to supervision. comprehensive claims management policies and report that provided meaningful insight into the state of
procedures by a few firms, which could impose significant affairs of the firms regarding implementation of the IFRS
risks in terms of accountability, fraud prevention and other standard. Consequently, the Regulatory Authority required
Thematic reviews risk management aspects. The deficiencies identified firms to conduct a gap analysis and develop an initial
Amendments to the risk-rating model as part of the review were formulated in risk mitigation project plan, to be updated periodically, to monitor a firm’s
programmes, which were then implemented by firms.
progress in effectively implementing the standard by the
In 2019, the Regulatory Authority conducted a thematic deadline of January 2022.
review to assess the management by regulated firms of Client money
their reinsurance cover and the security of reinsurers used. Following the 2016 client money thematic review which Agreed upon procedures
The review assessed regulated firms’ level of implementation resulted in firms strengthening client money policies,
of effective reinsurance practices, procedures, systems, and procedures, systems and controls, a second review was Insurance Supervision also reviewed and updated the agreed
controls, all of which form an important part of an insurer’s conducted in 2019 of insurance intermediaries permitted upon procedures report (AUPs) for insurers and insurance
overall risk management policy. to hold client money. The purpose of the review was to intermediaries, in consultation with external auditors. These
AUPs provide further detailed requirements on the firms’
ensure the protection of client money and its segregation external auditors for the reconciliation of prudential returns
Regulated firms were surveyed to assess their ability to from a firm’s own funds in accordance with the Regulatory
manage reinsurance-related risks. The survey looked Authority’s rules and requirements. to the audited financial statements. The AUPs will be used
at areas such as reinsurance strategy and corporate for the 2019 audited financial year onwards.
governance, the process for selection of reinsurers, During the 2019 follow-up review, there were no repeat
evaluating security of reinsurers, and the monitoring of findings of issues highlighted from the previous review. In
reinsurers and firms’ exposure to any unconventional order to comply with relevant rules and requirements, some
form of risk transfer including finite reinsurance. firms were required to amend their reconciliations process,
as weaknesses were found in some of the firms’ calculations.
The Regulatory Authority communicated the findings of
the review to regulated firms along with its expectations
that the governing body of each firm fully recognise
their responsibilities in relation to reinsurance-related
risk governance and risk management and place
remediation of the identified deficiencies as part of the
review among their top priorities. Supervisors urged
each firm to fully implement its proposed action plan to
address any deficiencies identified as part of the review.