Steps towards effective accounting standard as provided through Internation Financial Reporting Standards (IFRS 17) received a boost last week as experts in the insurance sector gathered to tackle visible challenges therein.
The roundtable organised by Mettlehouse Consulting was themed: “Resolving Insurance Service Expenses Allocation Challenges in Financial Reporting under IFRS 17.”
Leading the discussions in his keynote address, the Commissioner for Insurance, Mr. Sunday Thomas, considered it a privilege to have been invited to the programme that is aimed at, among others, recommending best practices for harmonisation, comparability and consistency of expense allocation, especially as it relates to insurance service expense, in the insurance industry in Nigeria.
While congratulating Mettlehouse Consulting for this great initiative and gathering distinguished presenters, panellist and participants to discuss on a great topic titled “Resolving Insurance Service Expenses Allocation Challenges in Financial Reporting under IFRS 17,” he said the topic was of utmost significance in the realm of insurance accounting and financial reporting as the adoption of IFRS 17 represents a paradigm shift in the accounting standards for insurance contracts, and its implementation has presented the industry with formidable challenges, particularly in relation to the allocation of insurance service expenses.
He said: “We thank Mettlehouse Consulting for willingness to supporting the insurance industry in its IFRS 17 implementation, which they have started with the identification of this significant challenge currently faced in our industry and gathering this distinguished personalities to proffer recommendations to achieve transparency, comparability and consistency in financial reporting by our insurance operators in Nigeria.
“We all know that the IFRS 17 has fundamentally transformed the way insurance contracts are accounted for as it introduced a principles-based approach that aims to improve transparency, comparability, and consistency in financial reporting.
“While the overarching objective of IFRS 17 is commendable, the practical implications on expenses allocation have posed intricate challenges for insurers worldwide.
“This roundtable, therefore, presents a timely opportunity for us to engage in collaborative discourse and share insights on navigating the complexities of the insurance service expenses allocation under IFRS 17.”
The Commissioner pointed out that resolving the insurance service expense allocation challenges in financial reporting was an imperative endeavor that necessitates strategic realignment and driving by a proper board approved policy.
“Although, I still recognise individual entities peculiarity that plays a pivotal role in their expenses allocation, but as a regulated industry, the Commission is committed to the harmonisation of financial reporting practices among our licenced insurance operators in Nigeria to achieve comparability among the industry players as this remain one of the key objectives of IFRS 17.
“Therefore, in our deliberations today, I encourage each of you present to draw upon your expertise and experiences to delve into the practical complexities and intricacies surrounding the allocation of service expenses under IFRS 17 and possibly proffer solutions that will enable us as industry achieve one of the cardinal objectives of IFRS 17, which is comparability.
“It is my fervent hope that our discussions today will yield actionable strategies and recommendations to address the challenges posed by the allocation of service expenses under IFRS 17.
“By leveraging on the collective wisdom of this esteemed gathering, we can surmount these challenges and contribute to the advancement of financial reporting practices within the insurance industry in Nigeria,” he said.
Earlier in his welcome address, the Vhief Executive Officer, Mettlehouse Consulting Limited, Barineka Thompson, described the Roundtable as the first of its kind in the insurance industry in Nigeria.
He recalled that IFRS 17 was a big, new standard for a big, old industry, stressing that it changed fundamentally the way in which an insurance entity reports its financial dimensions and results for a given period and over time.
According to him, “the International Accounting Standard Board (IASB) is highly confident in their expectation that it will bring greater transparency and comparability about the profitability of both new and existing insurance contract business.
“As the insurance industry in Nigeria strives to surmount the pervasive challenges of IFRS 17 implementation, the unintended risks of how best to model the recognition, measurement, presentation and disclosure of insurance service expenses and other operating expenses as well as other areas where the principles of the standard leaves more for digression, has nonetheless thrown up significant challenges to both operators, regulators, auditors and other advisors.
“MHCL, desirous in supporting the insurance industry in its IFRS 17 Insurance Contract implementation, has identified some significant challenges currently faced by Operators, Auditors, Actuaries and other implementation Advisors and Regulators in the transition from IFRS 4 to IFRS 17.”
He identified one of these challenges in the area of “Insurance Expense Allocation,” and associated risks of how best to model the recognition, measurement, presentation and disclosure of insurance service expenses and other operating expenses, and still achieve fairness, transparency, comparability and consistency in financial reporting by Insurers and Reinsurers in Nigeria.
According to him, the purpose of the roundtable discussion with the Theme: “Resolving IFRS 17 Insurance Service Expense Allocation Challenges in Financial Reporting,” is to engage industry stakeholders, IFRS 17 Steering Committee members, implementation advisors, actuaries, IT experts, auditors, and executives of insurers and reinsurers in robust discourse on the apparent challenges of expense allocation and data capture, against the significant variation of IFRS 17 requirements, and recommend best practice solution.
“We intend to reach a collective resolution that will bring about harmonized principles of practice tailored to suit the Nigerian nuances and achieve comparability and consistency in expense modelling.
“Some of the key objectives of this Roundtable includes; appraisal of IFRS 4 and IFRS 17 requirements on expense modelling, identifying IT and data capture format, and recommending best practices for harmonisation, comparability and consistency of expense allocation across underwriting companies in the insurance industry.
“It is the desire of MHCL that the Roundtable will be very educative and impactful while the output will serve as input to Regulators for the benefit of all stakeholders. Moreover, it will facilitate efficiency in ongoing transition implementation by operators, and surveillance by regulators for the benefit of all stakeholders.
“To this end, MHCL has put together a body of experts comprising Partners from the Big 4 Audit Firms, practicing and consulting actuaries, CFOs, and regulators. The Commissioner for Insurance has assured us that he will personally give the keynote address, as all Faculties for Paper Presentations and Panel Discussions are already seated here with us in the hall to play their pivotal role,” he added.
