National Insurance Commission (NAICOM) Introduces IFRS 9

The National Insurance Commission (NAICOM) has introduced International Financial Reporting Standards (IFRS) 9.

The IFRS 9 is an accounting standard that would force insurance companies to measure their liability in a way that the insuring public can determine their claims payment capability through their financial statements. Simply put, depending on how the liability is measured based on required standard, a company’s balance sheet can be reduced to zero.

Findings shows that the development is unsettling many operators putting them on a race for survival. IFRS are standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB) to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.

Further investigation showed that in July 2014, the International Accounting Standards Board issued the completed version of IFRS 9 Financial Instruments. IFRS 9 sets out the requirements for recognising and measuring financial assets and financial liabilities. It replaces IAS 39 Financial Instruments, with the recognition and measurement effective date set at January 1, 2018.

IFRS 9 provides significantly improved information because it introduces a structured approach to the classification and measurement of financial assets that reflects the business model in which they are managed and their cash flow characteristics; provides for more timely recognition of loan losses as it uses a forward-looking expected credit loss model; and has an improved hedge accounting model that better links the economics of risk management with its accounting treatment.

With the introduction of the IFRS 9 this year by NAICOM, many insurance companies may not be able to submit their 2018 financial results to the commission and other regulatory agencies on or before the April 30, deadline for submission. It was also learnt that NAICOM is in talks with other regulatory agencies including the Nigerian Stock Exchange (NSE) to get a forbearance for the insurance companies that will not be able to submit their account before the April 30 deadline.

This, it appears, the commission has been able to get. There seems to have gotten a one-month grace period for the companies.

One of the operators in an exclusive interview spoke on condition of anonymity. He stated: "NAICOM has replaced the IFRS 9 with IFRS 4 which has been their accounting standard before 2018. It is expected to begin this year but there is an option for us in complying with the new standard.

He said: “What it means is that we have to access our liability. It is just like loan. You have to quantify it in your books to know if it has gone up or not. So going forward, a client can determine that it wants to know whether you can pay claims when necessary."