The National Insurance Commission (NAICOM) has continued to mobilize its ranks towards the take off of the new International Financial Reporting Standard 17 (IFRS 17) for Insurance Contracts scheduled for January 1, 2023.
Since May 2017, the International Accounting Standard Board (IASB)
issued the new IFRS 17 Insurance Contract as a replacement for the current IFRS 4 on accounting for insurance contracts.
At the inauguration of the Sub-Working Groups (SWG) of the insurance industry financial reporting working group (IIFRWG) on Monday in Lagos, the Commissioner for Insurance, Sunday Thomas, said the constituted SWGs would assist the IIFRWG in providing guidance for seamless adoption of IFRS 17 by the Nigerian insurance companies effective January 1, 2023.
As part of the transition arrangement towards the new reporting standard, Thomas said the IIFRWG, which is an initiative of the Commission, was inaugurated on March 2, 2020 as an advisory and consultative team of experts.
He said the team was put together for the purpose of ensuring seamless adoption of IFRS 17 in Nigeria.
The initiative, he noted, was in line with the Commission’s strategic goal, as IFRS 17 would facilitate
transparency and accountability in financial reporting in the industry. Acknowledging the creditable performance of the Working Group, the Commissioner of Insurance expressed appreciation to members for their selfless service to the Nigerian insurance industry in this journey to IFRS 17.
“We all know that in May 2017 the International Accounting Standard Board (IASB) issued the international Financial Reporting Standard 17 (IFRS 17) Insurance Contract, which will replace the present IFRS 4 on accounting for insurance contracts with an effective date of January 01, 2023.
“Thus, beginning from January 01, 2023, all insurance and reinsurance contracts must be reported in accordance with IFRS 17 whose objective is to ensure that an entity provides relevant information that faithfully represents the insurance contracts.
“This information forms the 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,” Thomas said.
He said the constitution of the Sub
Working Group was necessary to help in fostering the country’s adoption of the IFRS 17 in line with acceptable
best practice barring any fresh shift in the effective date of the application by the International Accounting Standards Board (IASB).
In case there was no such further shift, he said the Nigerian insurance industry would be afforded less than two years to prepare for the adoption of IFRS 17.
Also, on January 28, 2020, he said the Commission issued a “Roadmap” on Adoption of IFRS 17 Insurance Contract for Insurance Industry in Nigeria”.
The activities and timelines in the Roadmap, he said were 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.
“In addition to the inauguration of the IIFRWG and issuance of the Roadmap, the Commission also organized an IFRS awareness training on IFRS 17 for Chied Executive Officers, Non- Executive Directors and Accountants of insurance and Re-insurance companies in
Nigeria,” he said.
The new SWG, he said, would further provide technical recommendations and production of relevant guidance for the implementation of IFRS 17 that members of the IIFRWG.
Besides, the Commissioner of Insurance said the SWGs are to assist the IIFRWG in the achievement of its mandates by considering those
more technical aspects in the implementation of IFRS 17 that would support in the
seamless transition.
The IIFRWG, he said, already identified three critical sub working groups, namely Accounting, Disclosure and Reporting Sub-Working Group, to assist on technical
issues relating to accounting; Technical, Actuarial, Data Governance, Process and Systems Sub-Working Group – to assist on technical issues relating to actuarial, data and IT, and Policy and Methodology Sub-Working Group – to interpret requirements and draft
methodologies and policies.
The terms of reference for the
Accounting, Reporting and Disclosures Working Group, Thomas said, would be to set up minimum disclosure requirements and financial
report templates; provide broad guidelines on standards interpretation where there is divergence of views and practical implementation of issues.
The group would also take care of implications of accounting and actuarial policy options that may be
selected; make suggestions on structure of target operating models;
ensure non-compliant practices noticed etc.
The Actuarial Systems and Data Working Group, he said, would be responsible for preparing the functional and technical specifications from the
methodology and requirements papers; define minimum data requirements and groupings for IFRS 17 related actuarial measurments; develop minimum standards and specifications for actuarial systems.
The group would, also be responsible for identifying the operational impact of IFRS 17 and developing and recommending standardised principles for assumption settings on lapse, future expense, risk adjustment, discount rates, loss rates, including mortality, estimates of future cash flows and other incidence rates used in the calculation of Contractual Service. The Margin (CSM) Methodology and Policy Working Group would be
responsible for interpreting the requirements and how the companies are expected to meet the standard; responsible for drafting the methodologies and policies papers.
