Finland employs a comprehensive security model involving government, private sector, and civil society. This reflects its geopolitical reality—especially its long border with Russia—and aims to ensure resilience nationwide. Finland seeks to be a security provider, not just a consumer, through strong national capabilities and cooperation with NATO, the EU, and Nordic partners.
The model covers seven core functions: internal security, defence, psychological resilience, leadership, international cooperation, societal functionality, and economic/infrastructure security. Responsibilities are clearly distributed across government levels, with sectors like insurance integrated into preparedness.
The National Emergency Supply Agency oversees sectoral pools, including insurance, fostering information-sharing and continuity planning. Defence relies on general conscription, with 70% of men and growing numbers of women completing service. National resilience is also built through education and cultural cohesion.
The insurance sector, via a Joint War Committee and the National Readiness Act, plays a key role in risk planning and emergency response. Environmental risks, including climate change, are increasingly integrated into this approach.
R+V Re, a global reinsurer with €3.5 billion in premium income and part of the German cooperative financial network, faces growing compliance demands due to an increasingly complex sanctions environment. With more than 25 active sanctions regimes issued by entities such as the EU, UN, US, and UK, sanctions compliance has become a core component of the company’s risk management strategy.
The company employs a structured, organisation-wide compliance framework. Sanctions clauses are embedded in contracts, and comprehensive internal policies are in place, including a 30-page sanctions manual, weekly legal updates, and mandatory training across departments. Every function, from underwriting and claims to finance, is involved to ensure no gaps in regulatory adherence.
Automated screening tools are used to check client and counterparty names against sanctioned lists, but common names and incomplete data often require manual verification, using additional identifiers such as birth dates or photographs. This layered approach helps avoid false positives and potential violations.
A key element is the company’s risk-based compliance approach. Business activities are assessed by geography and exposure to dual-use goods (with both civilian and military applications). High-risk regions and transactions receive enhanced scrutiny, allowing compliance resources to be used efficiently.
In claims handling, extra diligence is required since reinsurance payouts often pass through local insurers. R+V Re ensures the end beneficiaries are not on sanctions lists, reducing the risk of indirect violations. This is critical, as authorities like OFAC have imposed significant fines for unintentional breaches.
Recent geopolitical events, such as the war in Ukraine, have increased the compliance burden. Some reinsurers have exited Russian markets entirely, while others maintain limited operations under strict controls. Marine insurers, in particular, face new risks from the rise of the “shadow fleet”, vessels used to circumvent oil sanctions, demanding heightened vigilance and advanced due diligence processes.
AM Best, a leading insurance rating agency, has closely examined the effects of IFRS 17, a new global accounting standard that reshapes how insurance and reinsurance contracts are measured and reported. Replacing older, varied frameworks, IFRS 17 introduces greater transparency, consistency, and comparability in financial disclosures across jurisdictions.
At its core, IFRS 17 requires insurers to report liabilities based on three components:
- Discounted Best Estimate of Cash Flows: A forward-looking projection of future obligations.
- Risk Adjustment: Compensation for uncertainty in those cash flows.
- Contractual Service Margin (CSM): The unearned profit, gradually recognised as services are provided.
These changes provide a more accurate reflection of long-term profitability, especially in life insurance, and improve how stakeholders interpret the financial strength of insurers.
Revenue is now recognised as “insurance service revenue”, aligning with the actual delivery of services over time. This replaces the previous focus on written premiums, especially relevant for long-duration contracts. The new model smooths profit recognition across the life of a contract, aligning income with risk and service delivery.
Traditional profitability metrics like Return on Equity (ROE) remain comparable under IFRS 17, but other indicators have shifted. The Combined Ratio, a key performance measure for non-life business, now includes discounting effects and reclassifies certain expenses. This can make results appear more favourable, particularly for reinsurers, with an observed 8-10 percentage point shift in some cases.
Expense and loss ratios are also affected. Under the new framework, expenses not directly linked to policy acquisition may now fall under the loss ratio, distorting legacy comparisons. This requires a more nuanced interpretation of financial results.
For reinsurers with large life portfolios, IFRS 17 has led to a reduction in reported equity, as future profits are now captured in the CSM rather than as immediately visible retained earnings. While this affects presentation, it does not undermine actual financial strength. Analysts and rating agencies must adjust their models to reflect this reclassification.
Additionally, changes to how ceded premiums and commissions are treated under IFRS 17 can result in reported revenue figures that are lower than under previous standards. This affects market rankings and calls for revised benchmarking approaches.
Overall, IFRS 17 represents a significant shift in insurance accounting. While it alters how performance is presented, it offers a clearer, more standardised picture of insurer obligations and earnings. For AM Best, which relies on audited financial data for its building block rating methodology, the new disclosures provide deeper insight, particularly into the long-term sustainability of life and reinsurance operations.
Speakers:
- Colonel Jussi Kosonen, Director of National Defence Courses (Finland)
- Thomas Ullrich, Head of Legal & Claims, R+V Re (Germany)
- Mathilde Jakobsen, Senior Director, Analytics, AM Best (Netherlands)
