More than one in three (35%) global insurers are budgeting over 50m euros (US$58.7m) for IFRS 17 implementation, according to new research.
The Deloitte commissioned research, which was prepared by the Economist Intelligence Unit, also revealed a significant focus on technology expenditure for the new global accounting regulations which come into effect on 1 January 2021. It found that 87% of companies are expecting to upgrade their systems in advance of the 2021 effective date.
Insurers confident of meeting deadline
Deloitte global IFRS insurance leader Francesco Nagari 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.”
Research from Deloitte five years ago, prior to the release of the final IFRS standard, found that just 7% of insurers expected to spend more than 50m euros.
Mr Nagari added that despite the significant and increasing budgets involved, it was observed that 90% of insurers surveyed feel somewhat or very confident that they will hit the deadline.
“2021 is a challenging and critical milestone for the insurance industry but it will mark an important step towards one universal accounting language in improving transparency and comparability,” he said.
In addition to technology, insurers are also investing in specialist talent to not only implement new systems, but also encourage greater collaboration between finance, actuarial and other departments.
The research revealed that Asian respondents reported a much higher difficulty than their European counterparts with a number of key complex facets of bringing insurers into IFRS 17 compliance.
Deloitte Southeast Asia insurance leader Raj Juta noted that in Southeast Asia, insurers are having greater difficulty particularly with reviewing the operating model of actuarial, finance and risk functions, educating and training staff, and preparing investor relations and financial communications for shareholders and markets.
As a result, actuarial, accounting and collaboration skills will be in high demand.
“To become IFRS 17 compliant, many insurers around the world and in Southeast Asia alike are trying to drive tighter integrations between finance, actuarial and other departments. Since the data required to meet the standard will need to come from a wide range of areas and be processed in new ways, insurers will require individuals with not only actuarial and accounting expertise but also those who can piece together the aspects of IT, actuarial and finance most impacted by IFRS 17,” he said.
The research findings are based on the responses 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.