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Chuks Udo Okonta
The National Insurance Commission (NAICOM) today, Monday, inaugurated the Insurance Industry Financial Reporting Working Group (IIFRWG), an advisory and consultative team it constituted for the purpose of seamless adoption of International Financial Reporting Standards (IFRS)17 in Nigeria.
The Acting Commissioner for Insurance, Sunday Thomas, at the inauguration ceremony in Lagos, told the group which is made up of members of staff of NAICOM, insurance operators and experts from KPMG that their role 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, he said will also provide specialised knowledge to enhance an understanding of insurance specific issues and technical assessment of proposals by advising and supporting the Commission/Industry in the following areas: 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.
Others are:Consider and make recommendations to the IASB on the need (if any) to amend the IFRS 17 Standard.
Suggest ways in which technical, operational, technological, accounting and actuarial matters arising from the adoption of IFRS 17 can be resolved.
Develop non-mandatory guidance for implementation of the IFRS 17.
Advice on changes to the relevant Prudential Guidelines or Guidance documents issued by the Commission in conformity with the adoption of IFRS 17
Consider any other financial reporting issues that may arise while executing the mandates of the Working Group.
Thomas noted that in May 2017 the International Accounting Standard Board (IASB) issued the international Financial Reporting Standard 17 (IFRS 17) Insurance Contract, adding that this standard will replace the present IFRS 4 on accounting for insurance contracts by January 01, 2022.
He said beginning from January 01, 2022, all insurance and reinsurance contracts must be reported in accordance with IFRS 17, stressing that 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,” he said.
On the Impact of IFRS 17, he posited that it is instructive to note that the IFRS 17 is more than an Accounting issues, stressing that 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,” he posited.
Thomas maintained that if the effective date of implementation is not shifted again, it therefore means that Nigeria has only one year to prepare for the adoption of IFRS 17.
“It is against this backdrop that the Commission hereby constitutes a Working Group that will help to foster the country’s adoption of the IFRS 17 in line with best practice.
“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.
“Composition of the Working Group
The Working Group 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 added.
Thomas said the members of the Working Group may liaise with relevant parties active in the insurance financial reporting within the remit of the Working Group, including preparers, actuaries, auditors, users, industry organizations, Standard Setters and other regulators.
The aim, he said should be to ensure that the views from Nigerian stakeholders interested in insurance financial reporting and taxation issues are properly considered in discussions at IIFRWG.
He pointed out that the Working Group is advisory in nature. Thus, the Working Group’s output will always take the form of recommendation to the Commission and to support the Commission’s role to the industry and all those involved in the insurance financial reporting value chain. The Working Group should not express its views publicly in any way, he stressed.
Thomas said the Commission will give its full support to the Working Group to facilitate its smooth working and in achieving the set goals.
The Director-General, Nigerian Insurers Association (NIA) Mrs. Yetunde Ilori, implored members of the Group to work as a team and endeavour to share the knowledge acquired in the course of the assignment with their colleagues.
She thanked NAICOM for the initiative and pledged operators support and cooperation to all efforts adopted by NAICOM to develop the industry.
The leader of the Group, Director, Inspectorate, NAICOM, Barineka Thompson, pledged on behalf of the group to deliver on the mandate.