20 June 2013

Insurance Europe: IASB Insurance Contract proposals are welcome starting point

In revised proposals for the accounting for insurance contracts (IFRS 4 Phase II), the IASB has gone a long way towards addressing the significant concerns raised by insurers since the original draft in 2010. A number of critical areas requires further development to reflect the asset-liability management that is fundamental to insurance business. The final standard should clearly reflect this business model, in which insurance liabilities and related financial assets are managed together. Accounting requirements that deal with individual components in isolation, resulting in different measurement and presentation requirements, do not adequately reflect our performance in earnings.

For insurers, the critical issue is to reflect appropriately the presentation of current value changes in performance reporting in order to make insurers’ financial position and performance comprehensible to investors. This should reduce insurers’ cost of capital and facilitate their support of long-term investment in Europe. Insurance companies are predominantly long-term investors and therefore it is important to reflect meaningful performance in their earnings. To achieve a robust basis for accounting for the diversity of insurance products across Europe, further fine-tuning of the current proposals are necessary. Especially, the participating business requires appropriate and operational solutions.

The Insurance Contracts Project and the interrelated Financial Instruments Project (IFRS 9) are of crucial importance to the insurance industry. The key challenge for the IASB is to ensure appropriate and transparent presentation of the insurance business models which are inherently long-term orientated.

Press release

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