The International Actuarial Association (IAA) continues to support the International Accounting Standards Board's (IASB) financial reporting project to revise its International Financial Reporting Standard (IFRS) 4, Insurance Contracts. The IAA believes that a high quality global standard on the accounting for insurance contracts will be of benefit to both insurers and the users of their published financial statements.

The IAA provided a comment letter on November 30 in response to the IASB's 2010 exposure draft on this project. In that letter, the IAA pointed out that, although the proposal included in the exposure draft is moving in the right direction, enhancements to several aspects of it are desirable, namely:

including incorporation of a clearer and more consistent objective for risk adjustments incorporating diversification effects across portfolios;
acquisition costs that relate to acquiring a portfolio rather than incremental to a contract;
subsequent measurement of the residual margin;
an economic approach to unbundling;
a transition to the revised standard that treats currently in-force and new business in a consistent manner where practical.

In addition, the IAA indicated that it is in the process of developing implementation guidance to actuaries regarding the new standard, including a compilation of relevant techniques in developing discount rates and current estimates.

The IAA has been represented at the November meeting of the IASB's Insurance Working Group and at one of the FASB/IASB Roundtables held in December. It will also be represented at the Working Group meeting to be held in March. The IAA continues to provide advice on this project, both to the IASB and to practicing actuaries, having prepared a research paper on risk margins and current estimates in 2009.

During the course of the development of its comments regarding the IASB's Exposure Draft, the IAA's Committee on Insurance Accounting has also worked with the IAA's Member Associations, twelve of which also provided comments to the IASB, all of which are posted on the IASB's website (iasb.org) under its Insurance Contracts project.

To learn more about the work of the IAA on this topic, contact the IAA Secretariat care of the Chairperson of the Insurance Accounting Committee.