IFRS 17 costs facing global insurance industry estimated at $15bn-$20bn

Written by Michael Griffiths

07/06/2021

The total cost facing the global insurance industry to implement IFRS 17 is estimated to be between $15bn and $20bn, according to Willis Towers Watson (WTW).

A new worldwide WTW survey, believed to be the most comprehensive IFRS 17 survey to date, polled 312 insurers from 50 countries and revealed that estimated costs vary significantly by insurer size.

The figure of between $15bn and $20bn is the overall global industry estimate of the cumulative cost of delivering IFRS 17, with the average programme cost for the 24 largest multinationals being between $175m and $200m each, and $20m each for the remaining 288 insurers.

WTW global IFRS 17 advisory leader, Kamran Foroughi, described the cumulative figure as “extraordinary”, and suggested that it will lead to many questions from boards and investors.

“For many, significant improvements will also be required in business processes and finance operations to deliver IFRS 17 efficiently and link with other metrics,” Foroughi said. “With smart investment and the right people, an insurer’s IFRS 17 programme has the potential to help deliver long-term annual savings to show against the daunting up-front costs.”

As well as providing insurers with an opportunity to benchmark their programmes against the efforts of industry peers and insurance companies around the world, the WTW survey also revealed the top challenges insurers expect to face in order to successfully implement IFRS 17.

Other key findings from the study showed that over 10,000 full-time equivalent employees will be required to deliver IFRS 17. WTW said that this presents “major challenges” for insurers’ recruitment and retention strategies, both within and beyond their IFRS 17 programmes.

Only 52% of survey respondents also believe that IFRS 17 earnings will be slightly or much more helpful than current GAAP earnings, while 54% believe that the need for non-GAAP reporting will either slightly or significantly increase. Furthermore, WTW’s findings revealed that only 6% of companies in 2020 had a good understanding of the business implications of IFRS 17 – although in the latest research this figure has now improved to 17%.

“Strong doubts evidently remain about whether IFRS 17 will lead to a more useful metric than current GAAP/IFRS standards,” Foroughi added.

“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.”

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