PwC supports a converged standard. In the absence of a converged standard, we would support making targeted changes to current US GAAP.
We support a converged standard. In the absence of a converged standard, then we support making targeted changes to current US GAAP. These targeted changes include measuring particular guarantee features consistently, enhancing disclosures, and enhancing guidance on the level at which to assess premium deficiency.
We also have the following concerns about certain aspects of both the FASB and IASB proposals:
Scope: The scope as proposed appears to be much broader than the board intended, in particular around the fixed-fee service contract exception. Accordingly, we are proposing an indefinite deferral of the standard for non-financial service entities. We also propose allowing non-insurance financial institutions the option to follow the impairment guidance provided the final guidance is an expected loss model.
Risk adjustment: We believe there should be an explicit risk adjustment.
Margin release: We believe it is critical that the board develop a more refined principle or otherwise provide guidance that restricts what appears to be a wide range of options for recognizing the margin in net income.
Adjusting the margin: We believe that financial statements will provide relevant information if differences between current and previous estimates of the present value of future cash flows related to future coverage and other future services are recognized against the margin.
Discount rates: If discounting at a liability rate results in a Day 1 loss, it should be deferred.