The global insurance industry is forecast to spend up to $24bn (£19.6bn) implementing the new IFRS 17 accounting standard, which is significantly more than was projected a year ago.
The forecast comes from Willis Towers Watson (WTW), which surveyed 270 insurers from 45 countries, finding that there is still a huge amount of work to successfully deliver IFRS 17 ahead of the 2023 deadline.
Only 40% of the 26 large multinationals polled, and 20% of the other 244 companies, expect to deliver fully prepared programmes on time.
The findings also show that data, systems and processes are the top current concerns emerging from dry runs, requiring some of the greatest investment.
Furthermore, most firms expect a substantial increase in people required to run valuation processes under IFRS 17, with many turning to significant transformation and harmonisation across all metrics, including the use of automation, to address this.
Due to the higher-than-expected workload, WTW estimates that it will cost the global insurance industry $18bn-24bn to implement IFRS 17, which is significantly higher than the $15bn-$20bn it forecast a year ago.
Global IFRS 17 advisory leader, Kamran Foroughi, said: “The next 12 months are critical for the industry to deliver IFRS 17 programmes on time.
“The survey results lay bare the true scale of the challenge that inevitably means pushing more work post the 'go live' date in order to maximise delivery confidence for the programme.”
Overall, the research suggests that more than 10,000 people will be required to deliver IFRS 17 over the next two to three years, which is forecast to be a challenge for insurers’ staff recruitment and retention.
And while 14 of the 26 large multinationals surveyed are planning a 2022 investor update on IFRS 17, most other firms are not.
Similarly, while some companies are required by local statute to publish IFRS 17 accounts for the first quarter of 2023, and a few larger insurers intend to voluntarily, most companies are not planning to do so.
This comes after the UK Endorsement Board (UKEB) last month approved the adoption of IFRS 17 for use by UK companies, despite concerns remaining in areas such as reinsurance, coverage units and interim financial reporting.
The Association of British Insurers' (ABI) head of prudential regulation, David Otudeko, urged the UKEB to now focus on ensuring the UK’s voice is heard in resolving outstanding issues.
“This includes the current live issue relating to the quantification of benefits provided under an annuity contract, which is a material issue for UK annuity providers and was the subject of a recent IFRS interpretations committee tentative agenda decision,” he continued.
“We urge the UKEB as part of its remit for international influencing to engage with the IASB to secure a positive outcome for UK annuity providers.”
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Author: Chris Seekings