• Tuesday, February 27, 2024
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IFRS 17 implementation hangs on resolving insurance service expense discrepancy

Insurers focus on claims to restore public trust, confidence

The successful resolution of disparities in reporting insurance service expenses in the books of underwriting firms will rest pending the implementation challenges in IFRS 17.

Experts who deliberated at the maiden edition of Mettlehouse Consulting Limited (MHCL) IFRS 17 Insurance Industry Roundtable held in Lagos said achieving uniformity in reporting and presentation of insurance expense service would help in achieving consistency and comparability of insurance accounting in Nigeria.

Sunday Thomas, commissioner for Insurance said the topic “Resolving Insurance Service Expenses Allocation Challenges in Financial Reporting under IFRS 17″ is 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.

He said its implementation has presented the industry with formidable challenges, particularly in relation to the allocation of insurance service expenses.

While thanking Mettlehouse Consulting for its willingness to support the insurance industry in IFRS 17 implementation, he noted that achieving transparency, comparability and consistency in financial reporting by insurance operators in Nigeria will be a great milestone.

“We all know that the IFRS 17 has fundamentally transformed the way insurance contracts are accounted for as it introduced a principled-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 expense allocation have posed intricate challenges for insurers worldwide, Thomas said.

“Resolving the insurance service expense allocation challenges in financial reporting is an imperative endeavour 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 expense allocation, as a regulated industry, the Commission is committed to the harmonisation of financial reporting practices among licenced insurance operators in Nigeria, as achieving comparability among industry players remain one of the key objectives of IFRS 17, Thomas said.

Barineka Thompson, CEO, Mettlehouse Consulting Limited (MHCL) in his remark at the roundtable said “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, where the principles of the standard leaves more for the digression, has nonetheless thrown up significant challenges to both operators, regulators, auditors and other advisors.

MHCL, desirous of 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.

“One of these challenges is 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.