Shortage of consulting actuaries and auditors familiar with the new International Financial Reporting Standard (IFRS) 17 in Nigeria has slowed insurance companies’ transition plans and compliance.
Just as the industry regulator, the National Insurance Commission (NAICOM) is going back and forth with the few available consulting actuaries and auditors to achieve a uniform financial accounting format, the insurance companies have missed their annual and quarterly returns deadline with NGX Limited and the Securities and Exchange Commission (SEC), particularly for publicly listed companies.
This is as insurance companies struggle for the services of few available IFRS 17 Actuaries and Auditors in Nigeria, even as they have gone as far as Kenya and South African markets to close the gap and hasten compliance.
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Moruf Apamapa, managing director/CEO, of NSIA Insurance Company Limited said the transition to IFRS 17 comes with challenges across board.
He stated that before this time, NAICOM had written to the SEC to allow publicly quoted companies extra time to submit their 2023 annual returns and 2024 first-quarter returns following perceived bottlenecks with the transition process.
“We do not have enough resources in the country to be able to manage the process, and even the regulators themselves are contending with few available resources within their system. So, IFRS 17 is more than a simple accounting. You have limited resources in terms of actuaries in the market, so we had to rely on actuaries from South Africa and Kenya to meet up”.
“So, there is limited resource personnel who are attending to all of us, and this transition from four to 17th standard poses challenges, he said.
Apampa said a couple of companies actually have gotten approval for their audited accounts, which is only one requirement. Therefore, for the IFRS 17, they will have to convert their financial statements into 17 formats, and that is what we are struggling with.
“So, there is back and forth between the auditors, the actuaries and even NAICOM because they need to agree on a format that is quite detailed and encompassing according to the standard, he said.
Meanwhile, majority of the listed insurance companies have written to the NGX and SEC, to inform their shareholders and the general public that their audited financial statements for the year ended 31st December 2023 and the unaudited financial statements for the first quarter ending 31st March 2024 may not be submitted within the regulatory due date of 30th March 2024 and 30th April 2024.
One of the companies said in letter to NGX, “This is as result of the unanticipated delays occasioned by the adoption and implementation of the IFRS 17 in the preparation of the audited financial statements for the year ended 31st December 2023. The adoption of IFRS 17 is under the directive issued by the company’s primary regulator, NAICOM effective 1st January 2024.”
Another listed company again calling for understanding in the notice to shareholders said, “Your Company is however making concerted efforts to expedite the process and is optimistic that the requisite submissions will be made no later than July 31, 2024.”
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Mayowa Adeduro, managing director/CEO, of Tangerine Insurance who responded to questions on the state of implementation said “Quite several practitioners especially insurers and reinsurers are yet to render accounts and returns to primary regulators NAICOM and ditto to secondary regulators SEC and NGX.”
He said the major challenge has been the adoption of IFRS 17 presentations of accounts.
“Capacities of external audit firms have been thinned out because most financial institutions have December 31st Year End reports. There are limited resources available to companies and firms on IFRS 17 audit and presentations of accounts.
According to him, there are three layers of reviews and assurance reports towards the presentation of your audited accounts. “Apart from the work of your external auditors, you need external actuaries to confirm your insurance contract liabilities, insurance revenue and related expenses; you also need external estate valuers to value properties, plant and equipment, you need external financial consultants or different audit firm to value your unquoted equities.”
“You also need an assurance report of another consultant for overall presentations. Mind you, even the regulators have limited human capacities to attend to all these companies at the same time”.
Adeduro also said, it has been quite excruciating for practitioners and I think our regulators are quite appreciative of the challenges hence there has not been threats of sanctions to companies for delayed report.
He also pointed out that several companies have made heavy investments in human capacity on IFRS 17 in the last 3 years, and some of those hands have been lost to ‘Japa syndrome’. While some have left to competitors within and outside the industry. However, the adoption of IFRS 17 has come to stay, Adeduro said.
Emmanuel Otitolaiye, chief financial officer, of Linkage Assurance Plc said all the insurance and reinsurance companies may not be able to meet up with the deadline for filling their accounts with regulators because of the challenges of first-time adoption of IFRS 17 as of December 31, 2023.
“The combined effect of these on the reporting chain – management, auditors, actuaries and all assurances providers are that more time and resources would be required to cope with the expanded work even within a limited time frame, hence the potential inability to meet up with the deadline.”
Otitolaiye, who is also the chairman, of the Accounting Technical Committee of the Nigerian Insurers Association (NIA) stressed the implications to include the inability of companies and regulators to have early closure on 2023 financial reporting activities. “The investing public may also not be able to make prompt decisions on their investment.”
“However, the adoption of these standards is designed to protect the interests of investors and other stakeholders by preventing fraud and financial crimes as a result of poor reporting.
“Yes, there may be a delay in the submission, but it is an opportunity for insurance companies to improve the quality and efficiency of their financial reporting models.”
NAICOM has said that effective January 1, 2023, all insurance and reinsurance companies in Nigeria would migrate from the present International Financial Reporting Standard (IFRS) 4 to IFRS 17 model.
With this, insurance and reinsurance firms was expected to present their financial reports in accordance with IFRS 17, whose objective is to ensure that all insurance companies provide relevant information their transactions in a uniform manner that aligns with peers in other markets across the world.
The commission said the information in the IFRS accounting model of insurance firms would form the basis for users of financial statements to assess the effect that insurance contracts have on the entities’ financial position, financial performance and cash flows.
