For the purpose of transparency and efficiency in the reporting of financial accounts in the insurance sector, information on activities of insurance companies will now be reported in compliance with International Financial Reporting Standard (IFRS 17) in line with global standards, Omobola Tolu-Kusimo writes.
THE insurance industry is set to witness a big change.The change, which will occur through financial reporting standard, the International Financial Reporting Standard (IFRS) 17, will lead to significant implications on Information Technology (IT) systems, strategic management, business processes, actuarial services, treasury and employee skills.
In all of these, there are a lot of challenges that will be faced by the insurers but there will be transparency and efficiency in the reporting of financial accounts in the insurance sector.
To ensure that there are minimal disruptions to businesses of insurance companies, the National Insurance Commission (NAICOM) has constituted a Working Group named, the Insurance Industry Financial Reporting Working Group (IIFRWG) to help foster the country’s adoption of the IFRS 17 in line with best practice.
According to the Acting Commissioner for Insurance, Sunday Olorundare Thomas, if the effective date of implementation is not shifted again, it means that Nigeria has only one year to prepare for the adoption of IFRS 17.
Thomas, who spoke during the inauguration of the IIFRWG Working Group held at Oriental Hotel, Lagos, said the IIFRWG consists of representatives of the Nigeria Insurers Association (NIA), NAICOM directors, actuaries, tax consultants like Akintola William Delliotte, Pricewaterhousecoopers, Ernst and Young and KPMG.
He disclosed that in May 2017, the International Accounting Standard Board (IASB) issued the International Financial Reporting Standard 17 (IFRS 17) Insurance Contract.
He said the standard will replace the IFRS 4 on accounting for insurance contracts by January 1, 2022.
He stated that from January 1, 2022, all insurance and reinsurance contracts must be reported in accordance with IFRS 17.
He said: “The IFRS 17 Insurance contracts establishes the principles for the recognition, measurement, presentation and disclosure of Insurance contracts within the scope of the Standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity’s financial position, financial performance and cash flows.
“It is instructive to note that the IFRS 17 is more than an Accounting issues, insurers will need to think holistically about the impact on their organisations. This standard will have significant implications on Information Technology systems, strategic management, business processes, actuarial services, treasury and employee skills. In all of these, there are a lot of challenges that will be faced by the insurers. Transition is going to be comprehensive and complex, but developing business plan before the effective date as it will affect key areas in the operational processes, system reporting, management information, compensation plan, tax and a host of other key performance indicators.
“The Commission issued the “Roadmap on Adoption of IFRS 17 Insurance Contract for Insurance Industry in Nigeria” on January 28, 2020. The activities and timelines in the Roadmap are intended to set the tone and facilitate a coordinated process and action steps. The Roadmap was issued for general adoption by all Insurance, Reinsurance, Takaful and Micro Insurance Companies in Nigeria. The Working Group should be guided by the roadmap in the execution of its mandates.”
Speaking on the composition of the Working Group, he said it consists of members with relevant expertise and experience of insurance business, its accounting as well as financial instruments. “There is a good mix of key stakeholders from different backgrounds,” he said.
On its terms of reference, he said the role of the IIFRWG is to support the Commission in providing technical advice on the adoption of IFRS 17 Insurance Contract and IFRS Interpretations on insurance specific matters and their application within Nigeria.
“The Working Group will also provide specialised knowledge to enhance an understanding of insurance specific issues and technical assessment of proposals by advising and supporting the Commission and the industry. They are to discuss technical assessment and interpretations issues arising from IFRS 17 and consider consistent application within the Nigerian insurance industry; Identification of interpretation and implementation issues on insurance specific matters and consider implementation questions raised by operators; Assist in the preparation and execution of activities that will facilitate the implementation of the adoption of IFRS 17; Monitor changes to IFRS 17 and final pronouncements as may be issued by the IASB and advise on implications within the Nigerian environment; among others.”
The Director-General, Nigeria Insurers Association (NIA), Mrs. Yetunde Ilori, said the Commission’s initiative to set up the working group is good.
She commended the commission for getting the operators involved from the beginning.
“What we did on our part was to bring in individuals that we know are competent and will cooperate with the commission and other stakeholders to quickly get this project done. We looked into our various technical committees, especially the accounting team, the IT, actuarial team and life and brought them into the group. I have no doubt they will do the job in good time,” she said.
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