JOSEPH INOKOTONG, in this piece, writes that actuaries have a big role to play in alleviating the challenges of International Financial Reporting Standard (IFRS 17) implementation in the insurance industry.
THE insurance industry in Nigeria has recorded tremendous achievements and it has continued to strive to break new grounds.
One of the challenges that the sector is grappling with is how to overcome the pervasive challenges of International Financial Reporting Standard (IFRS 17) implementation. This can be attributed to the shortage of qualified resource personnel like the actuaries.
The role of the actuaries in the insurance industry cannot be over-emphasised as the financial service regulatory agencies mandate quoted companies and others to file their financial reports on stipulated periods.
Actuaries are professionals who use mathematics and statistics to analyse the financial costs of risk and uncertainty.
In the insurance industry, they play a crucial role in helping insurance companies determine the premiums they should charge for policies. They also help to set reserves, which are the funds that insurance companies set aside to pay future claims. Actuaries are the people who make sure that insurance companies have enough money to pay out claims while still making a profit.
If a country doesn’t have enough actuaries, it can have a big impact on the insurance industry. Without enough actuaries, insurance companies may not be able to properly analyse and price their policies. This can lead to premiums that are either too high or too low, which can cause problems for both the insurance companies and the people who buy policies. It can also lead to more claims going unpaid, which can cause a lot of financial hardship for policyholders. It is really important to have enough actuaries to keep the insurance industry running smoothly.
For instance, experts say in countries like India, there is a big shortage of qualified actuaries. This, they noted, is leading to problems in the insurance industry, including higher premiums and lower claim payouts. It is a challenge that needs to be addressed and some countries are starting to take steps to address it.
In India, for example, the government is working to make it easier for the people to become qualified actuaries. They are also trying to attract more people to the profession by increasing salaries and offering other incentives.
It is important to make sure that there are enough qualified actuaries to meet the needs of the insurance industry. It is not just about making sure the industry runs smoothly, but also about protecting the people who depend on insurance for their financial security.
There are a lot of good reasons to consider a career as an actuary. Experts say it is a well-respected profession and it offers a lot of opportunities for advancement.
Actuaries can work in many different industries, not just insurance. They also tend to earn very good salaries and the job outlook is very positive. The best part is that it is a career that allows one to use their mathematical and analytical skills to solve real-world problems.
There is a correlation between actuaries and the International Financial Reporting Standard (IFRS 17).
The IFRS 17 is a set of accounting standards for insurance contracts and it was developed by the International Accounting Standards Board (IASB). It is an important standard because it helps to ensure that insurance companies are reporting their financial information consistently and transparently. Actuaries play a key role in implementing the IFRS 17 because they are responsible for helping insurance companies determine how to account for their insurance contracts under the new standard.
The IFRS 17 has a lot of implications for actuaries because it changes the way insurance contracts are accounted for. In the past, insurance companies could use different methods to value their insurance contracts, which made it difficult to compare the financial performance of different companies. However, IFRS 17 requires all insurance companies to use the same valuation method, which will make it easier to compare companies and understand their financial performance. So, actuaries will need to be familiar with the IFRS 17 and how it affects the way insurance contracts are valued.
Under IFRS 17, insurance companies need to calculate something called the ‘contractual service margin’ (CSM). This is a new concept that represents the amount of profit that an insurance company expects to make from an insurance contract over its lifetime. So, actuaries need to be able to calculate the CSM for all of the insurance contracts that their company has issued. They also need to make sure that the CSM is updated over time, as new information becomes available.
The IFRS 17 is a very complex standard and it requires a lot of specialised knowledge to implement it properly. Actuaries have the training and expertise to do this, so they are a key part of the process. Many people consider actuaries to be the “gatekeepers” of the IFRS 17. They are the ones who make sure that the standard is being implemented correctly and that the financial information is accurate. They play a very important role in making sure that the IFRS 17 is effective.
According to experts, IFRS 17 is the first truly international IFRS Standard for insurance contracts. IFRS 17 replaces IFRS 4 Insurance Contracts. When introduced in 2004, IFRS 4, an interim standard, was meant to limit changes to existing insurance accounting practices. Hence, IFRS 4 has allowed insurers to use different accounting policies to measure similar insurance contracts they write in different countries.
Some practices currently used by insurance companies have evolved in tandem with circumstances in particular countries. Often, the practices address only insurance products most prevalent in a country. In many cases, features of the accounting models used by the insurance industry are inconsistent with the IFRS Standards applied by other industries in the same country, limiting comparisons with other industry sectors.
IFRS 17 provides consistent principles for all aspects of accounting for insurance contracts. It removes existing inconsistencies and enables investors, analysts and others to meaningfully compare companies, contracts and industries.
IFRS 17 applies to insurance contracts. Although this means that IFRS 17 affects any company that writes insurance contracts, such contracts are generally not written by companies outside of the insurance industry. Most listed insurers use IFRS Standards. The total assets of insurers using IFRS Standards in 2015 was $13 trillion.
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