By ROSEMARY ONUOHA
AS insurance companies gradually become compliant to the International Financial Reporting Standard, IFRS, the National Insurance Commission, NAICOM, has urged them to be careful of incurring regulatory sanctions and fines.
Assistant Director (Inspectorate), Head AML/CFT Unit of NAICOM, Mr. Sam Onyeka who gave the charge, noted that incurring regulatory sanctions and fines could prevent foreign investors from being favourably disposed towards the Nigerian insurance industry.
According to Onyeka, insurers should maintain high level of professionalism in the discharge of their duties because the IFRS will compel them to reflect all infractions as well as fines incurred in the course of each financial year in their annual reports.
He also said that unnecessary infractions and fines could draw the ire of shareholders which could likely lead to a vote of no confidence on the management of any such company.
Onyeka said “With IFRS, every fine must reflect in the annual report of companies. And where fines become a bit too high, shareholders will begin to ask questions and when a company cannot give satisfactory answers to such questions, then trust on such companies will gradually diminish.”
Meanwhile companies that are in the habit of releasing their results late may lose out in the scheme of things as the IFRS gets on stream also.
This is because in the era of IFRS, strategic investors may readily take investment decisions based on financial results that are on hand rather than wait for ones that are not available.
NAICOM also warned that once a financial statement is delayed, it has lost its relevance for people that want to make economic decisions from such company.
Mr. Cyprian Amadi of the Supervision and Directorate Department of NAICOM therefore tasked underwriters that are in the habit of submitting results late to have a rethink if they don’t want to be left behind in the future.
Accordingly, Amadi emphasised early submission of financial results by insurance companies in line with relevant provisions of the law to the commission early enough.
While stressing that the aim for preparing financial statement is defeated when it is not made available to the users when needed, Amadi noted that the objective of financial reports include provision of useful information to a wide range of users in making economic decisions as the financial reports show the results of the stewardship of management, or the accountability of management for the resources entrusted to it.
He listed the users of financial statements to include investors, lenders, employees, customers, tax authorities, regulators, creditors and suppliers, as well as the general public.
Amadi said, “The closer to year-end that financial statements are issued, the more relevant and reliable the information in them is to be used for making decisions.”
Section 26 of the Insurance Act, 2003 prescribes that an insurer must submit audited financial statements and annual returns, among other things in writing to NAICOM not later than 30th June of each year.
Subsection 3 of the above section states that “An insurer which fails, neglects or refuses to file the returns and accounts under this section commits an offence and is liable on conviction to a fine of N5,000 per day for each day of default.”