The insurance industry has given its backing for a global insurance standard despite different views on how it should be drafted.
An Ernst & Young report reveals the sector supports the International Accounting Standards Board’s move to create a universal benchmark.
James Dean, practice leader for Ernst & Young's global insurance centre and one of the leaders of the review team, said: ‘Whatever final insurance standard the IASB develops will result in a fundamental change in the finance and actuarial functions of many insurance companies.
'Understanding the impact on systems, data, pricing and capital management will be a major challenge. Insurers should start now to examine how this will affect their financial systems and statements.’
The industry believes accounting for insurance should reflect the economics of the business. There is little support for current exit value without potentially substantial modifications. Many respondents do not agree that the transfer concept is appropriate for valuing insurance liabilities.
The ‘value in settlement’ measurement attribute supported by many, emphasises ultimate settlement since contracts are not likely to be transferred, but paid or settled by the company in the future.
Respondents broadly agreed with an approach to measurement for life insurance similar to the building block approach, but disagreed on the specific definition and application.
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