A bill mandating an international financial reporting standard has intensified the frantic hunt for actuaries, exposing a severe shortage that compels insurers to seek expertise abroad. Regulators expect the standard to improve transparency and safeguard the industry’s financial health, yet the lack of local specialists threatens to slow progress.

Regulators insist IFRS 17 promises sharper insight into insurers’ finances, allowing better risk assessment. Yet, success depends on bridging the talent deficit, upgrading IT systems, and integrating global standards into corporate policies.

The directive the National Bank of Ethiopia (NBE) issued imposes uniform international reporting to modernise how insurers measure assets and liabilities. Authorities see these rules as a linchpin for stronger oversight, anticipating tighter disclosures to reduce risk. But, the limited pool of Ethiopian actuaries has pushed insurers to tap professionals from places like Kenya, where specialised talent is easier to find.

Under the Accounting & Auditing Board of Ethiopia (AABE), chaired by Eyob Tekalegn (PhD), state minister for Finance, insurers are required to deliver reliable, timely financial and non-financial data. The NBE, whose Vice Governor, Solomon Desta, serves in AABE's Board, intends to use the information to measure insurers' stability and management effectiveness. Though the International Financial Reporting Standard (IFRS) 17 officially took effect in 2023, several insurance firms are still transitioning. Through their Association, they have spent about seven million Birr annually to ensure past reports have complied with the new standards.

However, the acute need for actuaries remains unmet.

A 2014 law on financial reporting mandated IFRS adoption and led to the creation of the Accounting Board, a 12-member federal agency comprising figures such as Meseret Damtie, federal auditor general, and Solomon Desta, NBE's vice governor.

Insurers had operated under IFRS 4, allowing local adaptations. Now, they should keep distinct accounts for long-term, general, and takaful insurance lines, ensuring more clarity in their statements. The directive requires quarterly and annual reporting, rigorous audits, and dedicated actuarial functions. Officials believe strict enforcement, paired with sanctions for non-compliance, could modernise outdated methods and strengthen client confidence through enhanced risk measurement. They say this approach can boost public trust and improve product offerings.

Eighteen insurance firms reported total assets of 65.6 billion Br in June 2024, a 32pc rise from the previous year. General insurance dominated the industry, while liabilities and net assets grew, aided by stronger underwriting. Inflation weighed on fixed-income holdings, but gross premiums surged on motor coverage. Net earned premiums also climbed, and the combined ratio reached a five-year high, though liquid assets lagged behind requirements.

Several insurers received qualified audit opinions for not complying with IFRS 17, enforceable since January 2023. TWC Consulting was retained to guide insurers through IFRS 17’s complexities. Local insurers see its background in supporting similar transitions across East Africa could help them upgrade processes.

According to Kefele Birhanu, Oromia Insurance’s acting finance director, progress has been impacted by the shortage of trained staff and inadequate use of technology. He observed how difficult it has been for Ethiopian professionals to pass actuarial exams abroad, blaming deeper inadequacies in the education system.

The Accounting Board is forming the Ethiopian Institute of Certified Public Accountants to address the talent gap, focusing on IFRS and actuarial training. Accounting & Auditing Board Acting Director, Fikadu Agonafer, expects the legislation establishing the institute to be ratified soon. He disclosed that some insurance firms have yet to comply to the required standard.

“It's under investigation,” he told Fortune, warning that non-compliance could face legal action as the Board enforces standards.