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The IASB is right to push the industry towards a fair value rather than historic-cost approach. Contracts in the insurance industry may be peculiarly diverse owing to national, cultural and regulatory differences – and, in the life sector, very long term. But investors are not well served if these are valued using age-old market conditions and interest rates.
The worry in the industry, or at least in parts of it, is the amount of volatility that the new regime will bring in its wake. When the IASB published the latest iteration of its proposals last week, it introduced some refinements to quell insurer opposition, but it also acknowledged that these will carry a cost in terms of complexity. Even so, the proposed changes will be profound.
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