HRH The Prince of Wales launches new partnership with the global insurance industry to drive action to tackle climate change
HRH The Prince of Wales launched his Sustainable Markets Initiative (SMI) Insurance Task Force during a visit to Lloyd’s, the world’s leading insurance and reinsurance marketplace. The SMI Insurance Task Force, convened by HRH and chaired by Lloyd’s, is comprised of executives from many of the world’s largest insurance and reinsurance companies*, providing an influential platform for the sector to collectively advance the world’s progress towards a resilient, net-zero economy.
With a unique view of the climate crisis, through its many decades of providing support to communities, businesses and economies in the face of increasingly severe and frequent weather events, the global insurance industry has a critical role to play. Alongside mitigating and managing the impact of these disasters, the industry continues to provide financial support across multiple industries to build greater climate resilience, supporting the increased scale and speed of the transition.
The SMI Insurance Task Force has today published its Statement of Intent, committing to provide climate positive financing and risk management solutions to support and encourage individuals and businesses around the world to accelerate their transition to a sustainable future.
During the visit by HRH, the Lloyd’s Lutine Bell rung out twice to mark the new and significant global insurance industry commitment to drive climate positive action at pace, through a number of key initiatives. For commercial and individual customers, these actions include adapting and expanding coverage for offshore wind projects in response to rapid growth and new technologies, alongside the implementation of “build back better” claims clauses in home insurance policies to encourage customers to rebuild sustainably.
The SMI Insurance Task Force will also work with governments to establish a public-private disaster resilience, response and recovery framework, which will help protect developing nations from the evolving economic and societal impacts of climate change.
To support the rapid growth of green projects and innovation, the SMI Insurance Task Force will develop a framework to help unlock the more than $30 trillion in assets under management, increasingly directing capital towards investments that drive climate-positive outcomes in both developed and developing nations.
His Royal Highness, The Prince of Wales said: “The insurance industry is exceptionally well placed to understand the impact of climate change and the damage it can cause to us all if we don’t take action now. This is why I am so pleased that a large number of the world’s leading insurance companies have joined together to identify how the insurance industry can help put Nature, People and the Planet at the heart of our entire economy.”
Lloyd’s Chairman Bruce Carnegie-Brown added: “As the world begins to recover from a pandemic that has caused significant and far-reaching financial and societal challenges, it does so with an opportunity to build back with sustainability as a foundation and guiding principle. Although climate change poses unprecedented systemic risk, it is one which – through partnership and accelerated action – we have the means to address. As a task force, we are making a resolute commitment to be a catalyst for action to help create a more sustainable future through the risks we manage and the capital we invest.”
Global insurance industry faces IFRS 17 costs estimated at US$15 to US$20 billion
As the January 2023 transition date approaches, over 300 insurers reveal their top challenges in this comprehensive study by Willis Towers Watson.
The total cost faced by the global insurance industry to implement IFRS 17 is estimated to be US$15-20bn, according to a new worldwide survey by Willis Towers Watson.
Kamran Foroughi, Global IFRS 17 Advisory Leader at Willis Towers Watson, 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 annual savings to show against the daunting up-front costs.”
The Willis Towers Watson study polled 312 insurers from 50 countries and is believed to be the most comprehensive IFRS 17 survey to date. Estimated costs vary significantly by insurer size. The overall global industry estimate of the cumulative cost of delivering IFRS 17 is US$15-20bn, with the average programme cost for the 24 largest multinationals being US$175-200m each, and US$20m each for the remaining 288 insurers.
In addition to providing insurers with the opportunity to benchmark their programmes against the efforts of industry peers and insurance companies around the world, the survey also revealed the top challenges insurers expect to face in order to successfully implement IFRS 17, principally relating to people, data, systems and processes.
Other key findings 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 programmes.
– Only 52% of survey respondents believe that IFRS 17 earnings / equity will be slightly or much more helpful than current GAAP earnings / equity, and 54% believe that the need for non-GAAP reporting will either slightly or significantly increase.
– Only 6% of companies in 2020 had a good understanding of the business implications of IFRS 17 – this has now improved to 17%. 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) and lowest in APAC (average: 2.4). Nevertheless, much work remains and companies need to consider how best to ensure benefits of the IFRS 17 programme.
Since Willis Towers Watson’s last survey in June 2020, clear progress has been made in areas such as data and IT workstreams, although setting up a robust process designed to comply with tight reporting schedules remains a challenge. The survey also reveals little progress made in dry runs, disclosures and automation. Yet, given the lack of qualified resources, Willis Towers Watson predicts process automation will be critical to the successful implementation of IFRS 17.
Kamran Foroughi said: “Strong doubts evidently 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.
“If insurers are to unlock value from IFRS 17 they should be aiming for significant business process improvements including automation, efficiency and auditability ‘out of the box’. This will save time and money, allowing experts to be deployed on higher value tasks and enabling insurers’ reporting functions to do more, faster and with less. Regulation can be a spur to drive performance, if the conditions are right.”