Talkmore Gandiwa
HARARE – The Insurance and Pensions Commission (Ipec) said insurance companies continue to face challenges in complying with the requirements of International Financial Reporting Standard 17 (IFRS 17), despite supportive measures aimed at facilitating its adoption.
This new reporting standard, which took effect on January 1, 2023, after nearly two decades of development, replaces IFRS 4, which has been in place since 2005.
Under IFRS 17, insurers are required to maintain an updated balance sheet that accurately reflects insurance contract liabilities and provide a statement of profit for the reporting period.
While this is an international standard, Ipec’s Actuarial Director, Robson Mutangadura said the plan for Zimbabwe was for insurers to submit IFRS 17-compliant returns by mid-2023. However, a significant number of companies have not met this expectation.
Mutangadura expressed concern about the lack of compliance, saying, “We initially believed that we were collaborating effectively with the insurance companies, but now we are hearing about various challenges.”
Furthermore, he said IFRS 17 is being implemented globally and that the commission was under the impression that the industry was prepared for the transition.
Ipec is engaging with the industry to identify the specific challenges hindering compliance and to devise solutions.
Despite these initiatives, the number of compliant submissions remains low, indicating that many insurers are failing to comply with the new standard as required by the regulator.
Earlier this year, Claxon Actuaries highlighted numerous challenges that could impede the compliancy of IFRS 17 among non-life insurers and reinsurers in Zimbabwe.
These challenges include issues related to risk governance, data collection and analysis, market statistics on underwriting and claims, discounting assumptions, information management systems, necessary skills, and initial implementation costs.
According to Claxon, IFRS 17 requires insurers to perform frequent updates, which introduces complexities compared to previous simplified approaches.
The severity of these challenges will likely depend on factors such as the frequency of estimate changes, the complexity of contracts, and the systems used for data capture. Companies with extensive contract groupings and those lacking integrated systems may incur higher costs, particularly if they have longer contract boundaries and must implement the full general measurement model.
This presents significant challenges, especially for reinsurers.
Due to the complex requirements of IFRS 17 and its technical standards, the insurance industry is facing a significant need for upskilling. Skill sourcing is particularly challenging in Zimbabwe, which is experiencing a brain drain linked to economic instability.
External auditors have struggled to integrate effectively and meet audit review schedules. Capacity issues were particularly evident during the F23 reporting period. Some auditors requested additional time for reviews for various reasons.
