The end of the IBOR era is near and IBOR transitions are a big challenge for both the regulators and the insurance industry. Survey results have revealed that most of the insurance firms already have a formal transition plan in place. However, these often lack details, unified planning, and strategizing investment priorities. Nevertheless, we need to anticipate for the transition before the end of 2021.
Financial impact of COVID-19
At the beginning of 2020, the coronavirus COVID-19 disrupted the world in a manner that hardly anyone was prepared for. A vast amount of resources is required to get through this phase. For insurance companies, this means facing greater uncertainty regarding the management of financial risks on their balance sheet at a time when they are already dealing with the low interest rate environment and major regulatory changes, such as IFRS 17.
As a new accounting standard for insurance contracts, IFRS 17 is seen as one of the big regulatory disruptions for insurance companies in the coming decade. The determination of discount curves is crucial for the implementation of the standard. Underlying complexity will be further increased by a second disruptive change in financial markets: the IBOR reform.