01 June 2006

IAIS second paper to IASB on Phase II project

The IAIS published its second set of observations as further input to Phase II of the IASB’s Insurance Contracts Project which deals with the valuation of insurance liabilities for general purpose financial reporting. The IAIS paper sets out a number of principles, or key observations, on various issues including insurance liability measurement, risk margins and aspects of life insurance accounting.

The IAIS is of the view that:
 

• future cash flows relating to full settlement with the claimant/beneficiary should be the basis for measuring insurance liabilities.
   
• an approach which uses observable inputs from deep and liquid markets to the fullest extent possible is appropriate in insurance liability valuation.
   
• similar obligations with similar risk profiles should result in similar liabilities.
   
• probabilities which reflect likely policyholder behaviour are needed to achieve meaningful results.
   
• including adjustments for credit standing in the measurement of insurance liabilities would be misleading for users of general purpose financial statements.

  Press release
  Full Paper
   

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