Daily Insurance Industry News
Daily Insurance Industry News
Monday 20th of May 2019
November 8, 2007

IASB urged to collaborate with insurers

by Richard Kilner

Story link: IASB urged to collaborate with insurers

Neil Coulson, partner and industry specialist at CLB Littlejohn Frazer, has urged the IASB (International Accounting Standards Board) to guarantee the industry that that the next stage of its development of new standard insurance contracts will not occur in private.

Coulson has stated that the financial services industry are concerned that the IASB may alter its proposals on insurance contacts alone, without further input from insurers. He went on to say that as the new contract will only affect insurers it is vital that the industry’s thoughts are taken into account so that the new contracts will be practical and of real use.

Coulson also said that there were potential problems that needed ironing out by the IASB and the insurance industry talking to one another, to ensure that the proposals are based upon expected behaviour rather than an abstract accounting hypothesis.

He praised the discussion paper as a good beginning, but insisted that there were a number of contentious areas that required resolution, singling out the proposed means to value insurance liabilities as particularly unrealistic. The IASB’s proposal requires insurers to make an estimate of how much it would cost them to have a third party take over liabilities, a rare transaction that is often the highest on the balance sheet.

Instead, Coulson suggested that as insurers retain and settle liabilities themselves, a superior method of liability valutation would be on an exit through settlement basis rather than an exit through sale.

The current accounting standards for life insurance are inadequate, Coulson stated, and the situation needs rectifying with some urgency. However, the process may well be subject to delays following a decision due in 2008 by the US standard setter regarding whether or not it wishes to join the process.

Coulson concludes that if the IASB presses on then many will wish for substantial alterations to its proposals, and called on the IASB to collaborate with the insurance industry rather than formulate the draft standard by itself, behind closed doors.


News posted:

Related stories to IASB urged to collaborate with insurers: