European insurers have now produced their first annual reports on an
International Financial Reporting Standards-basis. Initially, at least, there may be a certain amount of inconsistency in reporting as a result of disclosure standards that permit a high degree of discretion and even experimentation. Any resulting uncertainty could raise the cost of capital, especially as many analysts and investors already have misgivings about the quality and clarity of insurance reporting.
Earlier this year, PricewaterhouseCoopers brought together leading insurance analysts to explore their perspectives on the latest developments in financial reporting. Most believe that IFRS has led to some improvement in insurers’ financial disclosure. However, many question whether IFRS has made it any easier to compare insurers against their peers.
Looking to the current alternatives, most of the analysts agreed that European Embedded Value (EEV) is a significant improvement on what went before, which is broadly in line with last year (see Figure 9). However, many are concerned that disparities in the application and underlying assumptions have made it difficult to compare EEV numbers.
The survey also highlighted concerns about some companies’ failure to embed the latest changes into their reporting and management systems. While some companies have been forced to rely on ad hoc project teams or outside consultants to lift them over the first IFRS hurdles, these fixes are inevitably costly, unsustainable and potentially unreliable. At a time when market and regulatory financial reporting demands are constantly shifting, the need for flexible and durable systems capable of anticipating and adapting to change is likely to become ever more pressing.
How PricewaterhouseCoopers can help you
PricewaterhouseCoopers has a global network of specialists who can help insurers to implement new reporting standards and meet stakeholder demands for more credible and transparent disclosure.
