Ahead January 1, 2023, International Financial Reporting Standard (IFRS) 17 implementation, Nigeria and other 50 countries may share from the estimated cost of $20 billion for the global insurance industry, if adequate work is done by the industry’s regulators, underwriters and stakeholders are not put in place.
The IFRS 17 implementation, which was issued by the International Accounting Standards Board, according to a survey by Willis Towers Watson (WTW), revealed that global insurance and reinsurance brokers recently polled 312 carriers from 50 countries ahead of the January 1st, 2023 IFRS 17 effective date.
While estimated costs vary significantly by insurer size, the overall global industry estimate of the cost of delivering IFRS 17 is $15 billion and $20 billion.
Additionally, WTW’s survey suggested that the average programme cost for the largest 24 multinationals stands at between $175 million to $200 million each.
Kamran Foroughi, Global IFRS 17 Advisory Leader at WTW, said: “This is an extraordinary figure that will naturally 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. With smart investment and the right people, an insurer’s IFRS 17 programme has the potential to help deliver long-term yearly savings to show against the daunting up-front costs.”
According to WTW, results from the survey also showed that issues relating to people, data, systems, and processes are among the main challenges for carriers as they look to successfully implement IFRS 17.
Other findings from the comprehensive IFRS 17 survey include: Over 10,000 full-time equivalent employees will be required to deliver IFRS 17. This presents major challenges for insurers’ recruitment and retention strategies, both within and beyond their IFRS 17 programs. Only 52 per cent of survey respondents believe that IFRS 17 earnings/equity will be slightly or much more helpful than current GAAP earnings/equity and 54 per cent believe that the need for non-GAAP reporting will either slightly or significantly increase. Only 6 per cent of companies in 2020 had a good understanding of the business implications of IFRS 17 – this has now improved to 17 per cent. Insurers believe that the impact on a majority of KPIs is likely to be small. KPIs which are believed to be affected are related to measuring profit, new business, and return on capital/equity.
Large multinationals have made more progress on a scale from 0 to 5 (average: 3.5) than the remaining insurers (average: 2.6), with progress highest in EMEA (average: 2.9) lowest in APAC (average: 2.4). Nevertheless, much work remains and companies need to consider how best to ensure the benefits of the IFRS 17 programme.
“Strong doubts remain about whether IFRS 17 will lead to a more useful metric than current GAAP/IFRS standards. 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,” said Foroughi.
The Commissioner for Insurance, Sunday Thomas, at the inauguration in Lagos informed the group made up of the National Insurance Commission (NAICOM) staff, underwriters, and experts from KPMG, said their assignment was to support the Commission in providing technical advice on the adoption of IFRS 17 Insurance Contract and IFRS interpretations on insurance-specific matters and their application within Nigeria.