Global insurers see costs of IFRS 17 implementation balloon
Global insurers have significantly underestimated the costs of moving toward a new accounting regulation, IFRS 17 Insurance Contracts, with more than a third now budgeting over €50m (£44.2m) for implementation, according to research from Deloitte
18 Jul 2018
Five years ago, prior to the final standard being released, Deloitte’s research suggested that just 7% of insurers expected to spend more than €50m, compared to the 35% who now say that is the figure, ahead of the official implementation date for IFRS 17 on 1 January 2021.
The latest update, which was prepared by the Economist Intelligence Unit, is based on a poll of 340 insurance executives from global insurers, located across the UK, US, Canada, Italy, Germany, France, Japan, Switzerland, Spain, China, South Korea, and the Netherlands. It highlights a significant focus on technology spend, with 87% of global insurers expecting to upgrade their systems in advance of the 2021 effective date.
Francesco Nagari, global IFRS insurance leader at Deloitte, said: ‘The long awaited standard, released in May 2017, aims to establish one set of financial reporting requirements for all types of insurance contracts.
‘However, to achieve compliance insurers need more granular data and more extensive calculations, going significantly beyond the information required for current accounting practices. The findings of our survey demonstrate that many more insurers are now working extensively and with substantial budgets to be compliant in time.’
Despite the cost and time constraints, Deloitte found that 90% of insurers surveyed feel ‘somewhat’ or ‘very’ confident that they will hit the 2021 deadline.
In addition to technology spend, insurers are also investing in specialist talent to not only implement new systems, but also encourage greater collaboration between finance, actuarial and other departments.
Andrew Spooner, partner at Deloitte UK, said: ‘Insurers are also reporting a labour shortage in the market of individuals with actuarial and accounting expertise. Part of this challenge is that the data required to meet the standard will need to come from a wide range of areas and be processed in new ways.’
Report by Pat Sweet