Change programmes are expected to run between 12-30 months, and IFRS comes into effect on 1 January 2021
92% of global insurers have yet to put their IFRS 17 solutions in place, a study has found.
Data from 240 insurance companies also reveals 88% recognise they need to invest in new processes to support disclosure requirements.
IFRS 17 is a new global accounting reporting standard for insurance contracts that affects every insurance company that reports under International Financial Reporting Standards (IFRS).
The International Accounting Standards Board (IASB) suggests that 450 listed insurers use IFRS standards, which means approximately $13tn (£9.8tn) of total assets are impacted.
In Aptitude Software’s Global IFRS 17 Readiness Assessment Report (GIRA), it says insurance companies recognise the scale of the project and the significant risks to implementing IFRS 17. It also shows that the majority of insurers are beginning to take action, but they are still at a very early stage in the planning and implementation process.
Change programmes are expected to run between 12-30 months.
Key findings of the report include:
- 92% of companies have yet to put their IFRS 17 solutions in place.
- 78% of companies are in the early research and impact analysis phase.
- 88% of companies said they would need new processes to support IFRS 17 disclosure requirements.
Martin Redington, chief technology officer, Aptitude Software comments: “IFRS 17 is the most significant change to insurance accounting that has ever taken place and is the latest of many pressures facing insurance CFOs. Insurance company profits are under duress as many sectors have become commoditised and many firms recognise the need to innovate their offerings and operations. In a post-IFRS 17 world, it will be difficult for CFOs to service the many financial and regulatory requirements without an approach that centralises control of reporting and financial data. IFRS 17 is already proving to be the straw that broke the camel’s back, driving insurance CFOs to modernise their financial systems.”
EY estimates that even smaller life insurers, those with < $10bn (£7.4bn) Gross Written Premium (GWP), will need a budget of $25m (£18.5m) for IFRS 17 projects, and for those larger insurers with >$25bn (£18.5bn) GWP they will need to spend upwards of $150m (£110.8m) to achieve compliance.
Redington added: “Time is of the essence. Insurers need to be selecting their vendors now and working on implementing IFRS 17 financial accounting solutions to avoid the skills shortage and ensure they comply in time. IFRS 17 is a massive project with significant risks. There is not a one size fits all solution, bespoke solutions are required. Without an appropriate plan and systems in place, we will see more insurers requesting delays to the IASB with others resorting to brute force to meet the deadline.”
How far along are UK insurers? Of the 22 that were tracked:
- Only 2 in ‘solution design’ phase
- 3 haven’t started any impact analysis
- 17 still in impact analysis
- On average, UK insurers reported that they expect to make a software selection on 10 June 2018…
- This reflects that IFRS 17 analysis will be prominent for UK insurance finance teams in 2018 and that companies in this region recognise the need to move forward quickly. Based on Aptitude Software’s anecdotal evidence of other global insurers, getting to ‘software selection’ in 6 months will require prioritisation of IFRS 17 projects (and extreme focus)
- No clear difference in when large insurance companies are progressing as opposed to smaller ones