The National Insurance Commission (NAICOM), through its Commissioner for Insurance/Chief Executive, Mr. Sunday Thomas, has inaugurated the Nigerian Actuarial Society Discount Rate Committee (NAS-DRC). The committee’s primary objective is to establish a standardized basis for determining discount rate factors to be used by the insurance industry and other stakeholders in the financial services sector. The proposed template will play a crucial role in implementing the International Financial Reporting Standard 17 (IFRS 17) for insurance contracts.
During the inauguration, Mr. Thomas highlighted that the establishment of a credible template would enhance accountability, prudence, and comparability in financial reporting. This, in turn, would support the stability of the Nigerian financial system. The committee’s membership comprises representatives from the Nigerian Actuarial Society (NAS), NAICOM, actuarial representatives of audit firms, and Resident Actuaries of Insurance Operators involved in annuity business.
The committee’s key responsibility is to determine the risk-free yield curve for use within the insurance industry. It will also provide commentary on any market movements that could impact the determination of the risk-free yield curve. By establishing a standardized basis for determining discount rates, the committee aims to promote consistency and transparency in risk assessment across the industry.
The proposed template will be particularly valuable in implementing IFRS 17, a global accounting standard for insurance contracts. It will enable insurance companies and other stakeholders to accurately calculate discount rates, facilitating better financial reporting and risk management practices.
The initiative aligns with NAICOM’s commitment to fostering accountability and prudence within the insurance sector. By ensuring a reliable and standardized approach to risk determination, the commission aims to enhance the overall stability of the Nigerian financial system.
As the NAS-DRC begins its work, industry stakeholders will eagerly anticipate the outcomes and recommendations put forth by the committee. The collaborative efforts of the committee members, with their diverse expertise, will pave the way for a credible and sustainable template for risk determination in the insurance industry and the wider financial services sector.
The establishment of a standardized template for discount rate factors is a significant step towards aligning Nigerian insurance practices with global standards, ultimately strengthening the industry’s ability to assess risks accurately and make informed decisions.
