The National Insurance Commission (NAICOM) in collaboration with the industry stakeholders is mapping out strategies for an effective smooth transition of the International Financial Reporting Standard (IFRS 17 in the Nigerian insurance market.
Players who gathered at a one-day interactive session held in Lagos observed that with a good number of underwriting firms yet to tidy their financial books despite the December 31, 2023 deadline given to them to migrate from IFRS 4 to 17, players are apprehensive as to what action NAICOM will take.
Speaking at the programme, where the Nigerian Insurers Association (NIA) and Accounting Technical Committee (ATC) were part of the gathering, the Commissioner for Insurance (CFI), Sunday Thomas commended the organiser of the event for the initiatives, particularly at a period when the industry is gearing up towards the submission of IFRS-17 in the sector.
Sunday also commended the role played by Nigeria Actuarial Society (NAS) audit firms and other consultants on the financial reporting value chain. Implementation presented the insurance industry with formidable challenges, particularly regarding the allocation of insurance service expenses.
According to him, achieving transparency, comparability, and consistency in financial reporting by insurance operators in the market will be a great milestone.
“We all know that the IFRS 17 has fundamentally transformed the way insurance contracts are accounted for as it introduced a principles-based approach that aims to improve transparency, comparability, and consistency in financial reporting. While the overarching objective of IFRS 17 is commendable, the practical implications on expense allocation have posed intricate challenges for insurers worldwide.
He said the discourse, therefore, presents a timely opportunity for the experts to engage in collaborative discourse and share insights on navigating the complexities of the insurance service expenses allocation under IFRS 17.
The Director-General of NIA, Mrs.Yetunde Ilori, who also spoke at the programme, stressed the need for collaboration among industry stakeholders especially at this critical time of implementation of the new standard.
She called on NAICOM in its quest to deepen knowledge, and cooperation with the industry in the overall interest of growth and development.
Also, the Chairman of the Accounting Technical Committee (ATC) of the NIA, Dr. Emmanuel Otitolaiye who is also the Chief Financial Officer, Linkage Assurance Plc, commended NAICOM for its unwavering support to the industry particularly in the areas of providing guidance and encouraging industry-regulator interactions towards effective implementation of the standard.
The Director, of Supervision Directorate, NAICOM, Mrs. Oluwatoyin Charles reaffirmed the commission’s commitment to facilitating a smooth transition and implementation of the IFRS 17 standard.
Mrs. Oluwatoyin said that IFRS 17 is a landmark standard that requires enhanced system architecture and data management.
She further stressed that IFRS 17 is a significant accounting standard for insurance contracts that aims to provide more transparent and consistent financial reporting for insurance companies.
“The adoption of IFRS 17 represents a paradigm shift in the accounting standards for insurance contracts, and its implementation has presented the industry with formidable challenges, particularly about the system architecture and data management.
The introduction of IFRS 17 has fundamentally transformed the way insurance contracts are accounted for, recognized, measured, presented, and disclosed, introducing a principles-based approach that aims to improve transparency, comparability, and consistency in financial reporting.
FRS 17 represents a monumental shift in the landscape of insurance accounting, with its emphasis on providing a comprehensive framework for insurance contract measurement, presentation, and disclosure, IFRS 17 stands as a testament to our unwavering dedication to building trust, instilling confidence, and foster sustainable growth in the global insurance sector.
The journey toward IFRS 17 has been characterized by diligent collaboration, rigorous analysis, and a steadfast dedication to excellence.
The adoption of IFRS 17 necessitates a comprehensive re-evaluation of our accounting practices, requiring us to navigate a path guided by precision, adaptability, and strategic vision.
This transformative process compels us to converge data, technology, and expertise to foster a culture of continuous improvement, operational efficiency, and informed decision-making. Furthermore, the implementation of IFRS 17 catalyzes advancing the role of actuaries, accountants, and finance professionals in shaping the future of insurance reporting. It presents an opportunity for us to leverage our collective expertise to drive substantive change, elevate industry standards, and unlock new dimensions of insight and value creation.
In parallel, the advent of IFRS 17 underscores the imperative of cultivating a robust dialogue on the implications, challenges, and best practices associated with this standard. It beckons us to engage in strategic discourse, knowledge sharing, and collaborative endeavours to enable a seamless transition and optimize the potential benefits of IFRS 17 for our organizations and the industry at large.”
She however noted the challenges that come with the implementation of the IFRS 17 standard for insurers including data management, system upgrades, and changes to actuarial and accounting processes.
“In essence, the evolving landscape of insurance reporting embodied by IFRS 17 compels us to embrace innovation, resilience, and a steadfast commitment to excellence. It beckons us to embark on a transformative journey marked by collaboration, adaptability, and strategic foresight, endeavoring to uphold the highest standards of integrity, accountability, and value creation in the realm of insurance accounting,” Oluwatoyin added.
The Nigerian Actuarial Society, through the IFRS 17 NAS NAICOM Discount Rate Committee, delivered a keynote presentation on the Discount rate as part of its role in providing a risk-free curve for the Nigerian. market The presentation, anchored by Mrs. Yeside Kazeem (President, NAS) and Nnamdi Odozi, discussed the use of the yield curve by the insurance market.
According to the Committee, there are several possible approaches to the creation of monthly rates and each one has different implications.
For example, monthly rates could be created from either spot rates or forward rates.
The methodology could be stepped, interpolated, or cubic spline approach.
The Committee charged insurance companies to make use of monthly rates published on the NAS website on behalf of NAICOM.
The interactive session was facilitated by Olumuyiwa Adebayo, the Managing Consultant, of FinPolNomics Green Finance Professional Services. The presentation was titled “Harmonizing Efforts in IFRS 17 Implementation: A Multifaceted Approach to Insurance Service Expenses, Risk Adjustments, Discount Rate, and Collaborative Industry Roles”.
Adebayo delved extensively into Insurance and reinsurance contracts under IFRS 17 with emphasis on recognition, measurement, presentation, and disclosure. He noted that the aim of the International Accounting Standards Board (IASB) for IFRS 17 is to bring increased transparency in financial information reported by insurance companies, consistency in the accounting for all insurance contracts, and adequate and reliable financial information about obligations, risks, and performance of insurance contracts.
“IFRS 17 is the first truly international, comprehensive accounting Standard for insurance, replacing IFRS 4 – an interim Standard that results in widely divergent practices,” he said.
