The Nigerian Government inaugurated the Nigerian Actuarial Society Discount Rate Committee (NAS-DRC).
The Committee is tasked with standardizing discount rate factors for use by the insurance industry and other stakeholders in the financial sector.
This was disclosed in a statement by Commissioner for Insurance, Mr Sunday Thomas in a bid to aid the implementation of the International Financial Reporting Standard 17 (IFRS-17) Insurance Contracts.
Discount rate
According to the statement, the standing committee was expected to support the setting up of a standardised basis for determining discount rate factors for use by the insurance industry and other stakeholders in the financial sector.
The commissioner said, setting a standard discount rate was necessary, particularly in the implementation of the IFRS-17, adding:
- “The membership of the NAS-DRC had been suitably drawn from representatives of NAS, National Insurance Commission (NAICOM) Actuarial representatives of Audit firms, as well as Resident Actuaries of Insurance Operators, with annuity business.
- “The President of NAS and a representative of NAICOM, not below the rank of a director, will serve as Chairman and Co-Chairman respectively, while the NAS shall provide the Secretariat,”.
Objectives
Mr Thomas also noted that the role of actuaries in the implementation of IFRS-17 cannot be overemphasized, citing the need for a credible, prudent, consistent and sustainable discount rate devoid of possible manipulation by different stakeholders, if the financial report is left to determine same for individual company’s use.
The Objectives of the NAS-DRC include determining the risk-free yield curve for use by the insurance industry and providing commentary on any market movement that might impact the determination of the risk-free yield curve, others are:
- “It is thus my sincere expectation that the inauguration of the NAS-DRC will no doubt enhance accountability, prudence and comparability in financial reporting and thereby support the stability of the Nigerian financial system.
The Insurance Commissioners added that he is hopeful that the deliberations and activities of the NAS-DRC will bring about the desirable impact for the Nigerian financial system.
The Industry in 2022
Recall Nairametrics recently reported that Leading insurance companies in Nigeria paid N129.93 billion in net claims in 2022, compared to N109.63 billion in 2021.
The insurance companies earned N335.04 billion in gross premium income in 2022, up from N267.66 billion in 2021.
The high claims have impacted the premium growth rate and profitability of insurance firms, with economic challenges, inflation, and fraudulent claims being contributing factors.
