Hostname: page-component-76fb5796d-22dnz Total loading time: 0 Render date: 2024-04-26T13:41:40.525Z Has data issue: false hasContentIssue false
  • English
  • Français

Insurance accounting: a new era?

Published online by Cambridge University Press:  18 May 2012

K. Foroughi ,
C. R. Barnard ,
R.W. Bennett ,
D. K. Clay ,
E. L. Conway ,
S. R. Corfield ,
A. J. Coughlan ,
J. S. Harrison ,
G. J. Hibbett  and
I. V. Kendix
...Show all authors
Get access Rights & Permissions [Opens in a new window]

Abstract

Insurance accounting has for many years proved a challenging topic for standard setters, preparers and users, often described as a “black box”. Will recent developments, in particular the July 2010 Insurance Contracts Exposure Draft, herald a new era?

This paper reviews these developments, setting out key issues and implications. It concentrates on issues relevant to life insurers, although much of the content is also relevant to non-life insurers.

The paper compares certain IFRS and Solvency II developments, recognising that UK insurers face challenges in implementing new financial and regulatory reporting requirements in similar timeframes. The paper considers resulting external disclosure requirements and a possible future role for supplementary information.

Keywords

EquityFair ValueFinancial InstrumentsInsurance AccountingInsurance CompaniesInsurance Contracts Exposure DraftInternational Accounting Standards BoardInternational Financial Reporting StandardsInvestment ContractsProfit or LossRevenue RecognitionSolvency IISupplementary ReportingVolatility
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 17 , Issue 3 , September 2012 , pp. 562 - 615
Copyright
Copyright © Institute and Faculty of Actuaries 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Accounting Standards Board (2004). Financial Reporting Standard 27 – Life Assurance.Google Scholar
Accounting Standards Board (2010). The Future of Financial Reporting in the UK and Republic of Ireland. Exposure draft. http://www.frc.org.uk/images/uploaded/documents/Part%201%20Web%20Optimized.pdfGoogle Scholar
Association of British Insurers (2001). Supplementary reporting for long term insurance business (the Achieved Profits method).Google Scholar
Australian Accounting Standards Board (2009). AASB 1038 Life Insurance Contracts.Google Scholar
CEIOPS (2010). Comment letter on IASB Exposure Draft on Insurance Contracts. http://www.ifrs.org/NR/rdonlyres/41456C51-8846-4674-A314-188F675AEEF2/17696/20101126161129_CEIOPScommentlettertoIASBonInsuranceContractsED20101126.pdfGoogle Scholar
CFO Forum (2004). European embedded value principles. http://www.cfoforum.nl/letters/eev_principles.pdfGoogle Scholar
CFO Forum (2006). Elaborated principles for an IFRS Phase II insurance accounting model. http://www.cfoforum.nl/letters/elaborated_principles.pdfGoogle Scholar
CFO Forum (2009a). Market consistent embedded value principles. http://www.cfoforum.eu/downloads/MCEV_Principles_and_Guidance_October_2009.pdfGoogle Scholar
CFO Forum (2009b). Market consistent embedded value principles. Basis for conclusions. http://www.cfoforum.nl/downloads/MCEV_Basis_for_Conclusions_October_2009.pdfGoogle Scholar
CFO Forum & CEA (2010). Comment letter on IASB Exposure Draft on Insurance Contracts. http://www.ifrs.org/NR/rdonlyres/CB33BC3F-801D-400A-92D9-85B43BE6EC73/17725/20101129131135_CFOFCEAFinalResponsetoIASBEDInsuranceContracts291110.pdfGoogle Scholar
CRO Forum (2008). Market Value of Liabilities for Insurance Firms Implementing elements for Solvency II http://www.thecroforum.org/publication/market_value/Google Scholar
Coughlan, A., Daguer, K., Hancorn, C., Jupe, H., Lynn, L., Mbatha, D., Williams, M., Woolley, C., Vickery, M. (2010). Getting to grips with the shake-up. PricewaterhouseCoopers. http://www.pwc.com/gx/en/insurance/solvency-ii/countdown/assets/ifrs-solvency-ii-shakeup.pdfGoogle Scholar
Deloitte (2010). The start of a new accounting era. Insurance Accounting Newsletter, August. http://www.iasplus.com/uk/1008ukinsuranceifrs.pdfGoogle Scholar
Dollhopf, A., Foroughi, K., Whitlock, P. (2010). Towers Watson Comments on the IASB Exposure Draft on Insurance Contracts. http://www.ifrs.org/NR/rdonlyres/E2B76684-E0B8-423E-81EF-19AFC95806B2/17803/20101130111151_20101130TowersWatsoncommentsonIASBInsuranceContractsED.pdfGoogle Scholar
European Commission (2009). Solvency II Framework (final text) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:335:0001:0155:EN:PDFGoogle Scholar
European Commission (2010) QIS 5 Technical Specification. http://ec.europa.eu/internal_market/insurance/docs/solvency/qis5/201007/technical_specifications_en.pdfGoogle Scholar
European Commission (2011) Proposal for a Directive of the European Parliament and of the Council amending Directives 2003/71/EC and 2009/138/EC in respect of the powers of the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority http://ec.europa.eu/internal_market/finances/docs/committees/supervision/omnibus2/com2011_en.pdfGoogle Scholar
Financial Accounting Standards Board (2010). Preliminary views on Insurance Contracts. Discussion Paper. http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175821311059&blobheader=application/pdfGoogle Scholar
Foroughi, K. (2010). Market-consistent valuations and Solvency II: implications of the recent financial crisis. British Actuarial Journal, 17, doi:10.1017/S1357321712000025.Google Scholar
Foroughi, K., Murray, C. (2011). Solvency II: Fair value judgment. The Actuary, February, 28–29 http://www.the-actuary.org.uk/875336/printGoogle Scholar
Horton, J., Macve, R., Serafeim, G. (2010). ‘Deprival value’ vs. ‘fair value’ measurement for contract liabilities in resolving the ‘revenue recognition’ conundrum: towards a general solution. Response to Exposure Draft. IFRS Insurance contracts. http://www.ifrs.org/NR/rdonlyres/8D533C7D-3B0B-464D-8D9C-526B279D8E0A/0/CL234MacveattREV.pdfGoogle Scholar
Institute and Faculty of Actuaries (2010a). Response to Exposure Draft. IFRS Insurance contracts. http://www.actuaries.org.uk/sites/all/files/documents/pdf/apifrsexdraftinsurancecontracts20101125response.pdfGoogle Scholar
Institute and Faculty of Actuaries (2010b). Response to HMRC Consultation on Solvency II and the taxation of insurance companies. http://www.actuaries.org.uk/sites/all/files/documents/pdf/aphmrcsolvencyiitaxationinsurancecompanies20100602resp.pdfGoogle Scholar
International Accounting Standards Board (2007). Preliminary Views on Insurance Contracts. Discussion Paper. London: IASB. Part 1: http://www.ifrs.org/NR/rdonlyres/08C8BB09-61B7-4BE8-AA39-A1F71F665135/0/InsurancePart1.pdf Part 2: http://www.ifrs.org/NR/rdonlyres/0D4B179F-E9E2-42E1-8B17-7CBD380CDA95/0/InsurancePart2.pdfGoogle Scholar
International Accounting Standards Board (2009a). Fair Value Measurement. Exposure Draft ED/2009/5. London: IASB. http://www.ifrs.org/NR/rdonlyres/C4096A25-F830-401D-8E2E-9286B194798E/0/EDFairValueMeasurement_website.pdfGoogle Scholar
International Accounting Standards Board (2009b). Financial Instruments: Amortised cost and Impairment. Exposure draft. ED/2009/12. http://www.iasb.org/NR/rdonlyres/9C66B0E5-E177-4004-A20B-C0076FCC3BFB/0/vbEDFIImpairmentNov09.pdfGoogle Scholar
International Accounting Standards Board (2009c). IFRS 9 Financial Instruments. http://eifrs.ifrs.org/eifrs/files/71/ifrs%209_standard_125.pdfGoogle Scholar
International Accounting Standards Board (2010a). The Conceptual Framework for Financial Reporting 2010. London: IASB. http://eifrs.ifrs.org/eifrs/files/136/conceptual%20fw%202010_130.pdfGoogle Scholar
International Accounting Standards Board (2010b). Fair Value Option for Financial Liabilities. Exposure draft. ED/2010/4. London: IASB. http://www.iasb.org/NR/rdonlyres/B72D8EB9-64D0-4766-9EEE-3A27EE2A9617/0/EDFairValueOptionforFinancialLiabilities_WEBSITE.pdfGoogle Scholar
International Accounting Standards Board (2010c). Hedge Accounting. Exposure Draft ED/2010/13. London: IASB. http://www.ifrs.org/NR/rdonlyres/05439229-8491-4A70-BF4A-714FEA872CAD/0/EDFIHedgeAcctDec10.pdfGoogle Scholar
International Accounting Standards Board (2010d). Insurance Contracts. Exposure Draft. ED/2010/8. London: IASB. http://www.ifrs.org/NR/rdonlyres/508B3E26-4355-46E6-ACCF-248E76AD3457/0/ED_Insurance_Contracts_Standard_WEB.pdf Note: the Basis for Conclusions is downloadable from http://www.ifrs.org/NR/rdonlyres/D393F6DD-D8FA-49CC-A728-2D3FFAFC2A46/0/ED_Insurance_Contracts_BASIS_WEB.pdfGoogle Scholar
International Accounting Standards Board (2010e). Measurement of Liabilities in IAS 37 Exposure draft. ED/2010/1. London: IASB. http://www.iasb.org/NR/rdonlyres/6FF9E7E5-2129-451B-B591-5A8911AF8BB5/0/EDIAS37Liabilities0110.pdfGoogle Scholar
International Accounting Standards Board (2010f). Presentation of items of other comprehensive income. Exposure draft ED/2010/5. London: IASB. http://www.iasb.org/NR/rdonlyres/58DEA5EA-8CFC-45A7-910E-A55F9B7EA04F/0/EDOCIJune10.pdfGoogle Scholar
International Accounting Standards Board (2010g). Revenue from Contracts with Customers. Exposure Draft ED/2010/6. London: IASB. http://www.iasb.org/NR/rdonlyres/EFA36EF7-238C-4C88-9C36-D6AACEB7762F/0/EDRevRecogSt0610.pdfGoogle Scholar
International Accounting Standards Board (2010h). International Financial Reporting Standard 9 Financial Instruments. London: IASB. http://eifrs.ifrs.org/eifrs/files/71/ifrs%209_168.pdfGoogle Scholar
International Accounting Standards Board (2011). Financial Instruments: Impairment. Supplement to ED/2009/12 Financial Instruments: Amortised Cost and Impairment. London: IASB. http://www.ifrs.org/NR/rdonlyres/2BD9895F-459F-43B8-8C4D-AFE8ACA0A9AD/0/SupplementarydocFinancialInstrumentsImpairmentJan2011.pdfGoogle Scholar
International Accounting Standards Board Expert Advisory Panel (2008). Measuring and disclosing the fair value of financial instruments in markets that are no longer active. http://www.ifrs.org/NR/rdonlyres/0E37D59C-1C74-4D61-A984-8FAC61915010/0/IASB_Expert_Advisory_Panel_October_2008.pdfGoogle Scholar
International Accounting Standards Board and Financial Accounting Standards Board Staff (2010). IASB/FASB December 2010 board meeting. Observer notes. http://www.ifrs.org/NR/rdonlyres/AADE7E2A-476E-4ECE-8C84-48AC5DC843BA/0/ITAg7to7C.zipGoogle Scholar
International Accounting Standards Board and Financial Accounting Standards Board Staff (2011). Summary of comment letters on the IASB ED Insurance Contracts. http://www.ifrs.org/NR/rdonlyres/905BFF63-6F53-4C83-B650-937C3C94565C/0/IC0111b03Eobs.pdfGoogle Scholar
International Accounting Standards Board Staff (2009). Credit Risk in Liability Measurement. Discussion Paper DP/2009/2. http://www.ifrs.org/Current+Projects/IASB+Projects/Credit+Risk+in+Liability+Measurement/DP+Jun+09/DP.htmGoogle Scholar
International Accounting Standards Board Staff (2010a). Discount rate for participating contracts. Paper. http://www.ifrs.org/NR/rdonlyres/E6736534-603E-4D9F-AAC9-02DAC45D179C/0/Discountrateforparticipatingcontracts_final.pdfGoogle Scholar
International Accounting Standards Board Staff (2010b). Draft IFRS Fair Value Measurement. http://www.ifrs.org/NR/rdonlyres/ECF2D525-ACB7-4FC8-9E29-B9FB072EC8F2/0/Part1FVMstaffdraftAugust2010.pdf [illustrative examples are provided separately]Google Scholar
International Accounting Standards Committee (1989). Framework for the preparation and presentation of financial statements’. London: IASC.Google Scholar
International Actuarial Association (2010). IAA comments on the IASB Exposure Draft Insurance Contracts. http://www.ifrs.org/NR/rdonlyres/80F7ECB7-5109-44BC-87BB-67FBDD547CA5/17888/20101130211119_IAACommentsEDInsuranceContracts.pdfGoogle Scholar
KPMG (2010). New on the horizon: Insurance contracts. http://www.kpmg.com/IM/en/IssuesAndInsights/ArticlesPublications/Documents/NOTH-Insurance_Contracts_Sep_2010.pdfGoogle Scholar
Lennard, A. (2002). Liabilities and how to account for them. An exploratory essay. London: Accounting Standards Board. http://www.frc.org.uk/images/uploaded/documents/Liabilities1.pdfGoogle Scholar
Macve, R. (2010). The case for deprival value. Abacus, 46, 111–119.Google Scholar
O'keeffe, P.J.L., Desai, A.J., Foroughi, K., Hibbett, G.J., Maxwell, A.F., Sharp, A.C., Taverner, N.H., Ward, M.B., Willis, F.J.P. (2005). Current Developments in Embedded Value Reporting. British Actuarial Journal, 11, 407–479.Google Scholar
Pricewaterhousecoopers (2010). Practical guide to IFRS – Insurance contracts Fundamental accounting changes proposed. http://www.pwc.com/gx/en/insurance/IFRS/assets/practical-guide-insurance.pdfGoogle Scholar
Towers Watson (2010). IASB's Insurance Contracts Exposure Draft, Insights, October. http://www.towerswatson.com/assets/pdf/3131/Towers-Watson-EU-2010-18414%20IFRS%20Insights.pdfGoogle Scholar
Treasury, HM and HM Revenue Customs and Excise (2010). Solvency II and the taxation of insurance companies. Consultation paper. http://www.hm-treasury.gov.uk/d/consult_eusolvencydirective.pdfGoogle Scholar