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EFRAG issued its final comment letter on the IASB discussion paper on insurance contracts. EFRAG agrees that insurance liabilities should be measured at an amount that comprises the discounted value of an unbiased estimate of the future cash flows plus some sort of margin, but has a number of concerns about exactly which future cash flows should be included (particularly as regards entity-specific cash flows, policyholder behaviour and discretionary participating contracts) and exactly what the margin should represent in addition to a margin for ‘pure risk’.
EFRAG also explains that in its view the principles that should be applied when accounting for insurance contracts are the principles that should be applied generally. EFRAG notes that in many cases those principles are also the subject of other active IASB projects (for example, the projects on measurement, revenue recognition, liabilities, and financial statement presentation); and it suggests that it might be preferable to accelerate aspects of those projects so that broadly-based principles can be developed, agreed and then applied to insurance.
Final comment letter on insurance