The insurance sector in Nigeria has the opportunity to compete with the peers around the globe once the much anticipated IFRS 17 is integrated, effective January 1, 2022.
This was disclosed by experts and industry regulators at the Deloitte IFRS 17 Breakfast Meeting, held in Lagos.
The IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017.
It replaces the IFRS 4 Insurance Contracts and related interpretations and is effective for periods beginning on or after 1 January 2022 (It was previously set for 1 January 2021), with either adoption permitted if both IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial instruments have also been applied.
“It is going to have huge impact in the sense that currently when liabilities are being measured, they are measured based on events that occurred, but the new standard is forward looking,” Oduware Uwadiae, partner-in-charge of IFRS implementation unit of Deloitte, said.
“It is looking at the risk on the entire contract and also the contract to the last mile. The current standards will only look at the risk as at today, what risks we are having today. But the new standard is looking at the entire risk from now till the end of the contract.
“So, if I sign a contract today and it is going to expire in the next six years, I have to measure my risk from today till the end of the six years. So as I am measuring it, if the risk is increasing each year, I can recoup additional loss on the instrument,” he said.
A major objective of the IFRS 17 is to standardise insurance accounting globally to help users of accounts make sensible comparisons between companies, their performance, their current financial position and risk exposure.
IFRS 17 also unifies the accounting model for all types of insurance contracts that will be transparent and aligned to general IFRS accounting of other countries.
It may pose quite a task for insurance companies to fully implement, hence has extended the launch date by one year from 2021 to 2022.
“Implementing IFRS 17 won’t be a flick, it is a journey and you are going to be working with your IT unit to make it work. The training has to run through the organisation,” Consultant at Deloitte Actuarial and Insurance Solutions, Giles Waugh, said.
Implementation of IFRS 17 will also require specialised talents in the actuarial field.