The National Insurance Commission (NAICOM) has ordered insurance companies in the country to train their respective board of directors and senior management staff on IFRS 9 accounting standard as insurance industry in the country transits to the new accounting format.
Speaking at a media briefing in Lagos recently, director, Inspectorate, NAICOM, Mr. Barineka Thompson, said, insurers must embark on awareness training for these set of people, while developing road map for adoption and follow-up action on IFRS 9.
While underwriters were expected to develop policies, procedures and governance structures for implementation, he said, operators must also perform an impact assessment to determine the high level implications of applying the new requirements, including potential accounting mismatches and resulting volatility of IFRS 9, urging insurers to equally carry out predominance test and present result to the board of directors for decision on choice of option.
Stating that operators were also to engage on classification and measurement of financial assets, develop test, apply and validate new impairment model based on expected credit losses rather than incurred losses, he called on underwriters to appraise new hedge accounting criteria, expected to be of limited interest to insurers.
Insurers, according to him, must address organisational responsibilities aligning actuaries, risk and accounting identity shared risk and actuarial data and conduct parallel testing and pilot phases for increased efficiency.
To him, “Insurers should already have prepared themselves for IFRS 9 before 1 January 2018 against year end financial statements and if relevant, have performed and concluded all testing and disclosure requirements. The tax impact of any accounting decisions, judgements and transitional adjustments arising from IFRS 9 will need to be understood and assessed alongside those arising from IFRS 17 to fully understand the overall impact, including on tax profile and volatility.”
Meanwhile, NAICOM has met with the Securities and Exchange Commission(SEC) and the Nigerian Stock Exchange(NSE) to seek one month regulatory waiver for listed insurance companies who would be unable to meet the March 31, deadline given to listed entities in the capital market to submit their 2018 financial account.
The one month waiver requested for by NAICOM on behalf of insurers, which is expected to elapse at the end of April 2019, was to allow listed underwriting firms submit their 2018 account in the required IFRS 9 format to their primary regulator as insurance industry continues to adjust to the new accounting method.
NAICOM had to hold discussion with SEC and NSE to ensure that listed underwriters were not sanctioned for failure to meet the March 31, deadline set by the capital market regulators for companies to submit their financial statements.
With such extension granted, NSE would not request operators to pay monetary fine within this period, while insurers were expected to have perfected their accounts in the new accounting format at the expiration of the grace period.
The Nigerian Federal Executive Council(FEC) had earlier approved January 1, 2018, as the commencement date for IFRS 9 in the country, but the date was shifted to January 2019, to allow insurance operators prepare themselves for the new task ahead.
However, January 2019, effective date seems too early for insurance industry as players struggle to implement the new accounting standard. It was to this end that NAICOM had to intervene for insurers operating in the capital market to avoid them being sanctioned by capital market regulators after March 31, deadline for submission account for quoted companies.
The deputy commissioner for insurance, Mr. Sunday Thomas said, “NAICOM is only implementing the IFRS 9 accounting standard that was released to the market by FEC in 2017,” adding that, insurance operators were given enough time to study the framework for its implementation, contrary to the belief of some people that the time frame is too short.
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