Phase I of this project was completed when IFRS 4 Insurance Contracts was issued in March 2004. IFRS 4 offered limited improvement in accounting by insurers and enhanced disclosures on amount, timing and uncertainty of future cash flows from insurance contracts. However, IFRS 4 was intended only as an interim Standard which allowed insurers to continue to use various accounting practices that had developed over the year, pending the completion of a comprehensive standard.
Phase II of the project, which is currently being undertaken, will result in a new standard to replace the current IFRS 4. That standard would eliminate inconsistencies and weaknesses in existing practices by providing a single principle-based framework to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. Phase II would also provide requirements for presentation and disclosures items to enhance comparability between entities.
Why are we undertaking the project?
The Insurance Industry is an important and increasingly international industry and insurance contracts expose entities to long term and uncertain obligations. Today, the accounting for insurance contracts does not provide users with the information they need to meaningful understand the insurer’s financial position, performance and risk exposure. In addition, International Financial Reporting Standards does not address specific insurance issues and it is not obvious how insurers should deal with these issues under current IFRSs. Consequently, great diversity in the accounting practices of the insurance industry has developed over time.
Read a presentation on the Project objectives
What are we doing?
In July 2010 the Board issued the Exposure Draft (ED) Insurance Contracts with a four-month comment period, ending on 30 November 2010. The proposals in the ED would eliminate inconsistencies and weaknesses in existing practices, by replacing IFRS 4 Insurance Contracts. Since then the board has been reconsidering the proposals in the Exposure Draft together with the FASB. While the Insurance Contracts project is not a Memorandum of Understanding project (MoU), the IASB and FASB are working together and have reached similar decisions on a number of decisions.
In September 2012, the IASB decided that it should re-expose its proposals with feedback being sought only on a limited range of questions. Read the press release.
How are we doing it?
Throughout all the stages of the project, the Board has undertaken an extensive programme of consultation across all major geographic regions with representatives of the insurance industry, the investor community and others, such as actuaries, auditors and insurance supervisors. In addition, the Board has held education sessions presented by external parties during public Board meetings on specific aspects of the proposed measurement model for insurance contracts.
We have informed our global constituency about our progress through webcasts and podcasts, email alerts and investor resources.
Consultation Groups-Insurance Working Group
In 2004, the IASB established the Insurance Working Group (IWG) to analyse accounting issues relating to insurance contracts. The group brings together a wide range of interests and includes senior financial executives who are involved in financial reporting.
Since its inception, the IWG has met on several occasions to discuss various proposals of Insurance Contracts accounting and to provide its input to the IASB.
Read more on the IWG.
Field Tests
During 2009 the IASB conducted a first round of targeted field tests. This involved sixteen insurance companies that took part in the targeted field test that was designed to assess whether the proposals under Phase II of the project can be applied rigorously and consistently in practice and to provide an understanding of how the proposed approach will change current practice.
In 2010, during the ED comment period, we conducted a second round of field testing with fifteen insurance companies.
Read more on the field tests conducted.
Round tables
In December 2012, we held Round-table discussions in Tokyo, London and Norwalk. The purpose of these meetings was to listen to the views of, and obtain information from, interested parties about the requirements proposed in the July 2010 Exposure Draft.
Read more on the round tables held.
Read more on the history of the project.