IFRS 17 implementation may cost up to £2bn in the UK, says Prudential CFO
The implementation of the new accounting standard IFRS 17 may cost between £1bn – £2bn in the UK, said Nic Nicandrou, chief financial officer of Prudential.
“Even if a very efficient way of dealing with all the operational complexity could be found, a figure in the range of £1bn–£2bn in the UK would not seem unrealistic. For Europe as a whole, the amounts involved will be considerably higher,” Nicandrou said in the Insurance Europe annual report 2016/2017.
IFRS 17 has been developed and presented by the International Accounting Standards Board (IASB) and aims to improve transparency and comparability among insurers and across jurisdictions.
The introduction of IFRS 17, the new international accounting standard for insurance contracts, is the biggest shake up of insurance reporting for decades as it will impact profit, equity and volatility, as well as reserving and financial reporting processes, according to industry experts.
The change that IFRS 17 will bring about to financial reporting is expected to be as fundamental as that introduced by the EU’s Solvency II regulatory regime on capital reporting, Nicandrou said. The total cost of Solvency II implementation for the UK insurance industry alone has been estimated at over £3bn (€3.6bn).
“In practice, extensive reengineering of data storage and actuarial and finance systems to generate all the necessary information will be required. We are talking about fundamental operational as well as technical accounting change,” Nicandrou said.
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