Some 97 percent of senior UK insurance professionals expect the new International Financial Reporting Standard (IFRS 17) to increase the complexity and cost of their operations, according to an SAS survey.
However, a similar number (92 percent) also said the new standard will improve financial transparency, while 84 percent expect it to deliver additional benefits beyond compliance.
According to SAS, IFRS 17 will fundamentally change the face of accounting. Insurance companies will have to report in greater depth on how insurance contracts affect their financial position, while regulation demands greater detail in financial analysis and increased co-operation between actuarial and accounting departments.
While the standard does not come into force until January 2021, 61 percent of respondents asked said they have already started preparation for the changes and 19 percent classed it as a top strategic priority.
Some 93 percent of respondents think IFRS 17 will completely change insurers’ business models, though almost all (99 percent) of insurers are confident that they will have achieved compliance before the enforcement deadline.
A further 87 percent of organisations believe the standard is crucial for the survival of the insurance industry or will, at least, increase its robustness against future shocks.
Only 12 percent of respondents view the regulation as solely a compliance exercise, and a minority (37 percent) believe they have the in-house skills and resources to achieve compliance.
Most UK insurers say their current systems are not up to the task and are preparing for major alterations, from upgrades to replacements. Some 84 percent of respondents said they were planning to upgrade their systems.
Though respondents said IFRS 17 will have a positive impact on their systems and processes.
Almost all (97 per cent) expect improved processes and automation to result, and that those improved capabilities will benefit other parts of the business. The same number also claim the changes will help them modernise their financial systems.
Lee Thorpe, head of risk business solutions at SAS UK and Ireland, said: “While the deadline may seem some time off, UK insurers must not wait excessively for a clearly defined interpretation of what IFRS 17 compliance means.”
He added: “The changes are significant and will change the face of financial reporting. Insurers should be prepared to start planning and considering their options early, adding strategic capability that can accomodate flexibility and scalability to future-proof the business.”
“Insurers should adopt an iterative approach to compliance and 60 percent are planning a tactical strategy before refining the solution closer to the deadline. Systems and processes with a strong emphasis on data management and governance will be crucial and preparation for IFRS 17 may see the aggregation of existing data sources into one platform to centralise data, reduce ongoing operational costs and mitigate business disruption.”
