One of the major IFRS 17 challenges is that it’s disrupting business as usual for insurers.
According to a WTW IRS 17 survey, there are major post-implementation challenges that insurers still need to overcome after reporting their half-year 2023 results under IFRS 17 for the first time.
The survey was conducted during June to August 2023, having collected responses from 235 insurers, including 25 large multinationals from different regions including Asia Pacific.
Highlights of IFRS 17 challenges
- IFRS 17 progress: While material progress has been made, survey participants state that much work remains post-implementation.
- Major challenges ahead as IFRS 17 moves into production: Data, availability of skilled resources and systems/technology remain the three greatest challenges.
- Barriers to understanding and explaining results: Only 55% of 2023 reporters feel “very confident” in explaining IFRS 17 simple scenario results to senior management or investors. This falls to only 18% and 9% when explaining complex scenarios and extreme scenarios respectively. More than half of 2023 reporters are not ready to perform business planning/P&L projections based on IFRS 17/9.
- Far from “business as usual”: With almost 70% of 2023 reporters expecting a longer working-day timetable (WDT), most insurers recognised substantial work is required to move IFRS 17 into business as usual reporting to address critical issues. Besides shortening the WDT, this includes material system/process improvements, as well as developing a greater analysis and understanding of IFRS 17 results.
- Dividend-paying capacity unaffected: Nearly all 2023 survey participants declared that dividend-paying capacity has been unaffected by IFRS 17.
Hefty cost of IFRS 17
The total cost faced by the global insurance industry to implement the IFRS 17 accounting standard is now estimated to be US$21-27billion, WTW observed.
This represents a substantial 15% increase compared to the previous assessment made in 2022, the firm pointed out.
Average cumulative programme costs for the largest multinationals are now predicted to be US$240 million each, and US$30 million each for the remaining insurers, WTW noted.
“With insurers facing hefty costs to implement IFRS 17, future investments need to be strategic and targeted, delivering quick and tangible benefits,” said Kamran Foroughi, Global IFRS 17 Advisory Leader at WTW. “Substantial operational efficiencies also need to be found to maximise the benefits of IFRS 17 and move the reporting into business as usual.”
