Global: Work required before IFRS17 goes live
Source: Middle East Insurance Review | Jul 2022
According to a WTW survey, most IFRS17 programmes will require a pragmatic approach to deliver on time.
Insurers have reported that there is still a huge amount of work to complete in order successfully to deliver IFRS17 ahead of the 2023 deadline, according to a global survey by WTW.
According to the survey, entitled ‘IFRS17: Will we make it?’, insurers report material progress has been made since the previous IFRS17 poll in 2021. However, most survey participants also express ongoing delivery concerns resulting in the need to apply more shortcuts and simplifications in order to deliver on time.
The total cost faced by the global insurance industry to implement IFRS17 is now estimated by WTW to be $18-24bn. This represents a substantial increase of 20% compared to the original estimate in 2021, primarily to reflect companies realising more work is required than first envisaged.
WTW global IFRS17 advisory leader Kamran Foroughi said, “The next 12 months are critical for the industry to deliver IFRS17 programmes on time. The survey results lay bare the true scale of the challenge that inevitably means pushing more work post the ‘go live’ date in order to maximise delivery confidence for the programme.
Findings from the study, which polled 270 insurers from 45 countries, include:
- IFRS17 progress: Only 40% of the 26 large multinationals polled and 20% of the other 244 companies expect to deliver fully prepared programmes on time.
- People: More than 10,000 people will be required to deliver IFRS17 in the next two to three years. WTW forecasted challenges in insurers’ recruitment and retention, both in IFRS17 programmes and related impacts elsewhere.
- Data, systems and processes: These are identified as top current concerns emerging from companies’ dry runs, requiring some of the greatest investment.
- Disclosure plans varied: While 14 of the 26 participating large multinationals are planning a 2022 investor update on IFRS17, most other firms are not. Similarly, while some firms are required by local statute to publish 1Q2023 IFRS17 accounts and a few larger insurers intend to voluntarily, most companies are not planning 1Q2023 accounts.
- Business as usual concerns: Most companies expect a significant increase in people required to run valuation processes under IFRS17. Many have little appetite for this, however, so are increasingly turning to significant transformation and harmonisation across all metrics, including the use of automation to address this. Managers are re-underwriting and de-risking their portfolios, as rate increases are no longer a panacea for improving underwriting results and satisfying skittish investors.
The report noted that issues that were especially relevant for the reinsurance and ILS markets in 2021 include the following:
- CAT losses in 2021 were the highest since the record high in 2017, with notable events including hurricane Ida, winter storm Uri, the Bernd floods in Europe and the December tornado outbreak in the US
- Losses associated with secondary perils continue to receive increased attention from reinsurers and ILS managers due to their magnitude
- COVID-19-related claims reserve trends are levelling off and stabilising
- Increased CAT loss experience is driving the market to
- improve underwriting, tighten coverage language and seek rate increases
- The retro market remains challenged by capital constraints
- The poor performance of some ILS sectors contrasts with the positive performance of CAT bonds. M