Commenting on the release of the insurance contracts exposure draft, released today by the International Accounting Standards Board (IASB), David Law, global insurance leader, PricewaterhouseCoopers, said:
"The proposals released today represent a fundamental change to the way insurers' accounting will be conducted in the future, resulting in one of the biggest challenges to hit the industry in recent years. The impact will be felt across the sector and will require insurers to conduct a complete overhaul of their systems and performance reporting. Due to the changes facing insurers, particularly in Europe as they implement Solvency II, these proposals will hit industry resources hard, at a time when they are already scarce.
"Nevertheless, insurers should welcome the exposure draft as a significant step forward to achieving a global comprehensive and comparable accounting model. They will welcome the opportunity for an open debate, in which they all have a vested interest in making their views heard."
Gail Tucker, partner, PricewaterhouseCoopers LLP, added:
"Industry reaction will be divided on these proposals. They will create increased volatility in insurer's reported results going forward, as market movements will now affect reported profit. There will also be significant changes to the presentation of the income statement which stakeholders will need to take the time to understand. Today's developments will also cast their net wider than the insurance industry, affecting all companies that issue contracts with insurance risk, such as financial guarantee contracts.
"Given the profound impact of these proposed changes, it is vital insurers work closely with industry analysts to make sure they fully understand the changes and what insurers' accounting will look like going forward. As there is only a small window during which the industry has an opportunity to influence the final outcome of these proposals, insurers need to act now in assessing the implications of the new model on both their existing contracts and business practices."
To further discuss with David Law, Gail Tucker, or Andrew Hill, please contact Rebecca Mill and Amy Tiernan on the details below.
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