Substantial work is needed to better understand and explain IFRS 17 results: WTW

After insurers reported their half-year 2023 results under IFRS 17 for the first time, they believe substantial work is still needed to better understand and explain results under the new accounting framework, and improve business as usual reporting processes, a WTW survey revealed.

The study, believed to be the industry’s most comprehensive IFRS 17 survey, polled 235 insurers from 37 countries/market, 160 of them reported for the first time during 2023.

Regarding the IFRS 17 progress, the survey revealed that, while material progress has been made, participants stated that much work remains post-implementation. And, as IFRS 17 moves into production, it will encounter major challenges, which include data, availability of skilled resources and systems/technology.

The survey also revealed that there are still barriers to understanding and explaining results. According to the 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.

Additionally, 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, WTW noted.

Finally, the survey found that dividend-paying capacity has been unaffected by IFRS17, with nearly all 2023 survey participants agreeing with this.

According to WTW, the total cost faced by the global insurance industry to implement the IFRS 17 accounting standard is now estimated to be $21-27bn. This represents a substantial 15% increase compared to the previous assessment made in 2022.

Average cumulative programme costs for the largest multinationals are, WTW stated, now predicted to be $240m each, and $30m each for the remaining insurers.

Kamran Foroughi, Global IFRS 17 Advisory Leader at WTW, said: “With insurers facing hefty costs to implement IFRS 17, future investments need to be strategic and targeted, delivering quick and tangible benefits. Substantial operational efficiencies also need to be found to maximise the benefits of IFRS 17 and move the reporting into business as usual.”

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