In addition to the other IFRS update regarding lease accounting, our IFRS expert, Luc Nijs, reports:
The IASB has proposed new unfirm rules for the insurance industry during summer, thereby ending the black box the industry was in relating more transparency and comparability. Insurers will have greater certainty about how their organisation is viewed and evaluated by investors, regulators and other key stakeholders.
The IASB proposal foresees a single standard that all insurers in all jurisdictions could apply to all contract types on a consistent basis. Crucially, the IASB proposes insurers, including life and general, direct insurance and reinsurance, measure their liabilities using the same approach.
The IASB further proposes insurance liabilities should be measured using a “building block approach”. This would see insurers making a best estimate of their liabilities plus a risk adjustment. However, to avoid a profit being recognised too early the amount of the liability will be increased to reflect the premiums charged to the customer. The best estimate and risk adjustment would also be re-measured at each reporting date.
Our IFRS course will review and analyze the proposal and evaluate the impact of the new rules expected to be implemented by 2013 or 2014.
