The document summarizes key points from a presentation on accounting for insurance contracts given at a workshop. It discusses the objectives of IFRS 4 Phase I, key problems with the interim standard, comments from analysts about lack of transparency, and the status and key aspects of the IASB's Phase II project to develop a new standard, including the proposed exit value model and contentious issues raised in response to the discussion paper. It also provides a high-level comparison to the EU's Solvency II framework and outlines some practical implications for financial reporting, operations, and resources.
Alternative risk transfer is the use of techniques other than traditional (re)insurance that provide risk-bearing entities with protection from risks of loss. The presentation shows current and prospective involvement of actuaries in the (re)insurance and capital market convergence.
Grant Thornton - IFRS News Special Edition Grant Thornton
Many commentators have long held the view that consolidating the financial statements of an investment entity and its investees does not provide the most useful information. Consolidation makes it more difficult for investors to understand what they are most interested in – the value of the entity’s investments. [December 13, 2012]
Alternative risk transfer is the use of techniques other than traditional (re)insurance that provide risk-bearing entities with protection from risks of loss. The presentation shows current and prospective involvement of actuaries in the (re)insurance and capital market convergence.
Grant Thornton - IFRS News Special Edition Grant Thornton
Many commentators have long held the view that consolidating the financial statements of an investment entity and its investees does not provide the most useful information. Consolidation makes it more difficult for investors to understand what they are most interested in – the value of the entity’s investments. [December 13, 2012]
Like the rest of the financial services industry, insurers are subject to increasingly complex and prescriptive regulations and standards. In the year ahead, insurers will need to focus on the new U.S.Department of Labor fiduciary standard, which is likely to have a significant effect on how insurance products are sold. Moreover, global developments, especially those related to the developing International Capital Standard, will require insurers to closely monitor – and ideally contribute to – official discussions about how globally active insurers should manage capital
The Insurance Reporting Challenge: Building an Integrated FrameworkAccenture Insurance
The reporting component of Solvency II has become a major concern for insurance companies operating in Europe. Solvency II Pillar III increases reporting requirements in terms of volume, frequency, timeliness and complexity. These, in turn, have a direct bearing on insurers’ data, processes, methodologies and organization. The pressure put on insurers to enhance their reporting calls for a revamped closing and reporting framework where integration is part of the approach. Beyond the new Solvency II requirements, reporting, in our view, remains a pressing issue at the global level.
Informe Deloitte. Time for a new direction? Market Consistent Embedded Value ...Planimedia
La entrada en vigor, el próximo 1 de enero de 2016, de la norma Solvencia II pronostica para la industria aseguradora significativos retos regulatorios, así como nuevas oportunidades con las que aportar valor añadido a su negocio.
En este sentido, y con el objetivo de ayudar a sus clientes en este periodo de transición, Deloitte ha elaborado una publicación en la que analiza el impacto de esta norma e incide en el rol que jugará el Embedded Value (EV) en el nuevo escenario regulatorio.
The blog provide some key insights on the subject – as to how to compute EIR for fixed or floating rate instruments, how to compute EIR for products which involves both interest income and fee income, what are the challenges which banks might face while computing EIR, what are the operational simplifications which banks might consider while computing EIR.
Strategic implications of IFRS9 oliver wymanGeoff Holmes
IFRS9 will fundamentally change the level and dynamics of credit provisions, and will result in significantly diminished returns for some segments. To date, most banks have focussed on ensuring compliance, but with the 2018 implementation deadline approaching attention is turning to understanding and mitigating the impacts.
IFRS9 materially impacts lending economics, particularly for consumer credit and SME products where some segments will be significantly less attractive than today. Given all lenders are affected, this represents a challenge and an opportunity. Those who develop their responses early and optimise their actions stand a good chance of getting ahead of the competition.
The paper attached examines how IFRS9 impacts profitability, where the effects are most material, and how lenders can respond.
We are happy to share 3rd Issue of our magazine Ingenious.
It contains
1. Artticle on solvency Margin by Gopinath sir in the section called progression.
2. List of AWF Qualifiers
3. Did you know by Indepal Singh Bindra
4. Data Centre latest economic data and small savings scheme rates
5. RBI launches e - Rupee by Geeta Mohan. P
6. Trade Infra in India by Bharathi Srinivasan
7. Rise & Fall of Crypto Exchange FTX by Savita Pillai
8. Role & Importance of professional insurance advisor Part 2 by Ankur Shah
9. Last RBI MPC meet statement
Gear Up for Solvency II & IFRS 4 Phase II with the Right Partner WNS Global Services
Divergent reporting standards in the insurance industry lead to discrepancies and confusion in comparing accounting results from different geographies. Solvency II and IFRS 4 Phase II will soon address this problem. Article is also available here - http://bit.ly/15p6jhy
Ifrs Accounting For Insurance Ashley Patel Pricewaterhouse Coopers [Autosaved]
1. CAIR/CARTAC/World Bank Workshop and Conference Rose Hall Resort and Spa, 1-5 December 2008 Accounting for Insurance Contracts The Long Winding Road 5 December 2008 Ashley Patel
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5. INSURANCE ACCOUNTING – ANALYSTS’ COMMENTS Between May and October 2007, PricewaterhouseCoopers carried out in-depth interviews with 39 dedicated insurance analysts from the US, Europe, Asia and Australia. ‘ As it stands, financial reporting for life insurance companies is not useful to investors. The fundamentals of the business are not visible. Analysts cannot do any basic analysis and they have to resort to alternative bases.’ ‘ Non-life business is not transparent because companies manage the level of reserves as the cycle swings up and down.’
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8. SCOPE OF THE DISCUSSION PAPER Insurance Contract Definition Disclosures One model for all types Policyholder Accounting
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10. THE MODEL AT A GLANCE Life of the contract Claims Receive premiums to stand ready Stand ready to pay claims Probability weighted Probability weighted The contract can be an asset or liability
11. CURRENT EXIT VALUE MODEL The amount the insurer would expect to pay to another entity if it transferred all its remaining obligations and contractual rights to that entity The Three Building Blocks Time value of money Discount rate Current unbiased probability weighted estimates of future cash flows Current estimates Risk Margin Service Margin Margins
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14. DISCOUNT RATES “ Consistent with observable current market prices for cash flows whose characteristics match those of the insurance liability , in terms of, for example, timing, currency and liquidity” Own Credit Characteristics
15. HOW TO CALCULATE THE RISK MARGIN No prescribed technique Compensation for bearing risk Reference to what a market participant would require Not a ‘Shock-absorber” Unit of account is the portfolio
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17. THE SERVICE MARGIN Day One Loss No Day One Gain/Loss Day One Gain If margins are higher or lower than those required by market participants? =
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19. UNBUNDLING Interdependent resulting in arbitrary measurement Interdependent but not resulting in arbitrary measurement Not interdependent Phase II for whole contract Phase II for whole contract, but IAS 39 for deposit IAS 39 for deposit, Phase II for insurance
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24. PRACTICAL IMPLICATIONS – FINANCIAL REPORTING Earnings volatility Revaluing insurance liabilities will create potential earnings volatility Potential day one profit or loss Using current exit values could lead to reported profit or loss at contract inception Impact on revenue The question of whether certain premiums should be treated as income or deposits is left open and could affect “top line” revenue Impact on equity Discretionary policy dividends qualify as liabilities only if there is a ‘constructive obligation’ to pay them
25. PRACTICAL IMPLICATIONS – OPERATIONAL Systems impact Forecasting future cash flows based on probability-weighted scenarios will require significant upgrade of modelling capabilities Organisational impact Use of risk margins and cash flow analyses in accounting will require closer integration among finance, regulatory, actuarial and risk management functions. Resource impact Need for more qualified actuarial as well as finance and IT personnel