Insurance world backs IASB over universal yardstick

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.

Further reading:

& Young’s report ‘Summary of Comment Letters on IASB Discussion Paper,
Preliminary Views on Insurance Contracts’

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