IFRS for insurers

The move to a harmonised International Financial Reporting Standard (IFRS) for insurance Contracts (IFRS Phase II) is gathering pace ahead of final consultations (due to begin in May 2010) and a final standard (due to be issued in 2011). A number of fundamental issues are still being debated and the current views of the IASB and FASB differ.

With market scrutiny and competition for capital having sharply increased in the wake of the financial crisis, the planned overhaul of insurance accounting could have a decisive impact on market valuation and investment, while presenting significant implementation challenges.

Insurers are also facing a shake-up in other key areas of financial reporting, including the basis for financial instrument measurement.

A key focus of the continuing debate over IFRS for insurance contracts is how closely the basis of measurement will correspond to Solvency II. Alignment between IFRS and Solvency II would open up valuable synergies in data management, modelling and investor relations and enable companies to avoid the expense and disruption of ‘digging up the road twice’.