Call for fair value insurance reporting standard

Richard Boulton’s comments came as a result of a consultation paper issued by the international standard setter, IASC, to update insurance reporting and support the stance of a joint working party consulting with the IASC.

Boulton said: ‘One of the big issues is the extent to which the fair value of insurance contracts and other financial instruments reflect not just the timing and certainty of future contracted cash flows but also intangibles.’

In the new economy, intangibles such as relationships with customers, investors, employees, suppliers and business partners and organisation assets such as brands, intellectual property and processes are increasingly relevant.

Responding to IASC’s consultation paper, a joint working party said: ‘We know that it is worth developing [measurement] techniques because fair value based information is more useful in the decision-making process.’

The working party comprised members of the English and Scots Institute together with Institute of Actuaries and the Association of British Insurers.

Gordon Ireland, member of joint working party, said: ‘The development of an international standard is particularly important since it will assist insurers in accessing global capital markets.’

It is however understood that certain European countries may obstruct the chosen path for development, for fear of too much speculation. France and Germany are understood to prefer a deferral-and-matching approach, rather than an asset-and-liability measurement method.

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