The overwhelming majority of UK insurers believe the incoming reporting standard IFRS 17 will be more costly than the Solvency II directive, new research has found.
A survey of senior insurance professionals by analytics firm SAS has found that a whopping 97% expect IFRS 17 to increase the complexity and cost of operating in the industry.
Approximately 90% are preparing for costs greater than those incurred by Solvency II, with 93% predicting that the reporting standard will completely change their business models.
"UK insurers must not wait excessively for a clearly defined interpretation of what IFRS 17 compliance means," SAS UK & Ireland head of risk business solutions, Lee Thorpe, said.
"The changes are significant and will change the face of financial reporting. Insurers should be prepared to start planning and considering their options early."
IFRS 17 takes effect on 1 January 2021, and is expected to usher in a significant transformation for insurance companies, encompassing all areas of financial reporting.
Despite insurers preparing for significant costs, it was found that 92% believe IFRS 17 will improve financial transparency, with 87% believing it is "crucial" to the survival of the industry.
Approximately 97% think the standard will result in improved processes and automation, while the same number believe it will help them modernise their financial systems.
Almost all said they are confident they will have achieved compliance before the enforcement deadline, with 61% already starting preparation for the changes.
However, most insurers say their current systems are not up to the task and are preparing for major alterations.
Data management systems will experience the greatest upheaval, with 84% planning to upgrade or replace them, while accounting and actuarial systems will also see significant change.
"Insurers should adopt an iterative approach to compliance and 60% are planning a tactical strategy before refining the solution closer to the deadline," Thorpe continued.
"Systems and processes with a strong emphasis on data management and governance will be crucial, and preparation for IFRS 17 may see the aggregation of existing data sources into one platform to centralise data."