The total IFRS cost faced by the global insurance sector to implement the standard is estimated to hit the range of US$15 billion - US$20 billion, said Willis Towers Watson recently.
This is an extraordinary figure that will naturally lead to many questions from boards and investors, said Kamran Foroughi, Global IFRS 17 Advisory Leader at Willis Towers Watson.
Estimated IFRS costs vary significantly by insurer size, according to a Willis Towers Watson study which polled 312 insurers from 50 countries.
The average IFRS cost for the 24 largest multinationals is US$175-200 million each, and US$20 million each for the remaining 288 insurers, WTW noted.
- More than 10,000 full-time equivalent employees will be required to deliver IFRS 17. This presents major challenges for insurers’ recruitment and retention strategies, both within and beyond their IFRS 17 programmes.
- Only 52% of survey respondents believe that IFRS 17 earnings / equity will be slightly or much more helpful than current GAAP earnings / equity, and 54% believe that the need for non-GAAP reporting will either slightly or significantly increase.
- Only 6% of companies in 2020 had a good understanding of the business implications of IFRS 17 – this has now improved to 17%. Insurers believe that the impact on a majority of KPIs is likely to be small. KPIs which are believed to be affected are related to measuring profit, new business and return on capital/equity.
- Large multinationals have made more progress on a scale from 0 to 5 (average: 3.5) than the remaining insurers (average: 2.6), with progress highest in EMEA (average: 2.9) and lowest in APAC (average: 2.4). Nevertheless, much work remains and companies need to consider how best to ensure benefits of the IFRS 17 programme.
“Strong doubts evidently remain about whether IFRS 17 will lead to a more useful metric than current GAAP/IFRS standards,” said Foroughi said. “This is particularly true in more mature markets, where we do not see an improved KPI benefit commensurate with the costs, and insurers are actively planning new supplementary reporting to help explain business performance.
If insurers are to unlock value from IFRS 17 they should be aiming for significant business process improvements including automation, efficiency and auditability ‘out of the box’, he advised.
This will save time and money, allowing experts to be deployed on higher value tasks and enabling insurers’ reporting functions to do more, faster and with less, he added.