Insurance companies given four years to adopt IFRS 9

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Insurance companies have up to 2021 to adopt IFRS 9 after the market regulators met insurance players and auditors and agreed that they needed sufficient data to implement it.

The Capital Markets Authority (CMA) in partnership with ICPAK held a forum with intermediaries and issuers on the implementation of IFRS 9 which was supposed to kick in globally this year.

IFRS 9, unlike IAS 39 is not prescriptive but requires an entity to state its assumptions and model. The market players agreed that historical data should be 60 months (5 years)

According to Standard Investment Bank, highly collateralized institutions may not see any significant impact under IFRS 9 reporting while it is likely that there will be an 8-15 percent increase in provision in other institutions (commercial banks).

In guidelines released for industry consultations, the Central Bank of Kenya banks were also spared the aftershocks of new provisions for bad debts by five years.

The rule would have made insurance companies less risk-averse while banks would lend less or require capital raising to cushion for the projected losses.

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