1. History of IFRS for Insurers
Insurance IFRS Seminar
December 1, 2016
Michael Lockerman
Session 4

2. Who are the players and key stakeholders?
FASB
IAIS
GNAIE
OSFI
EIOPA
G20
ACLI
IASB
NAIC
SEC
CFO
Forum
FSA
CRO
Forum

3. Players and Key Stakeholders
IFRS—International Financial Reporting Standards
Standard setter—International Accounting Standards Board (IASB) founded in 2001 and based in London
International Accounting Standards Committee (IASC) Foundation
Appoint IASB members
Exercise oversight
Raise funds
Similar to Financial Accounting Foundation (FAF)
Predecessor organization was International Accounting Standards Committee (IASC) founded in 1973

4. IASB Structure

5. Who are the parties in the standard-setting process?
Date
Who are the parties in the standard-setting process?
United States
(US GAAP)
SEC
Global
IOSCO
European
CEIOPS/
EIOPA
FASB
IASB

6. History of Project - IASB
International Accounting Standards Board
London-based, 14 members from 9 countries
Dedicated staff
Insurance Working Group (IWG)
Worked with FASB (U.S. Financial Accounting Standards Board) until 2011, then decided that “convergence” couldn’t be achieved. As a result, FASB issued its own exposure draft.
Pronouncements:
IAS (International Accounting Standards) by the IASC (predecessor of the IASB)
IFRS (International Financial Reporting Standards) by the IASB
These are identical – IAS was published before IFRS

7. History of Project - Influencers
Those providing significant input:
CFO Forum (European insurers)
GNAIE (Group of North American Insurance Enterprises)
Insurers from Japan
IAA (International Actuarial Association)
IAIS (International Association of Insurance Supervisors)
European Union (EU) – they mandate the IASB make the standards, but each country must adopt

8. History of Project - Objectives
To provide information to users of financial statements that is relevant for economic decision-making
To eliminate inconsistencies and weaknesses in existing practices
To provide comparability across entities, jurisdictions and capital markets

9. History of Project – Phase 1
Phase 1 started in 1997
2001 Draft Statement of Principles
2004 Phase 1 ended with IFRS4
Intended as a temporary standard to buy time to agree an appropriate accounting model
Defined insurance contracts
Revised IAS 39, guidance for investment products
Insurers to use existing accounting policies (local GAAP), but subject to a liability adequacy test
Substantial additional disclosures required.
Still allowed diverse practices
Applies to insurance contracts and investment contract with discretionary participating features, not insurance companies

10. History of Project – Phase 2
Phase 2 started mid-2004
IASB, IASB staff and IWG worked on a discussion paper called “Preliminary Views” or “Discussion Paper,” released in May 2007
Main text – 150 pages; Appendices – 80 pages
Over 160 Comments letters
Had something appealing and something offensive to everybody

11. 2010 Exposure Draft Board worked on for 2 years
Issued ED (Exposure Draft) July 2010
ED - 87 pages
Basis for Conclusions - 95 pages
Plus appendices with numerical examples

12. 2010 Exposure Draft Approximately 250 comment letters
Themes in issues by regions
Asia Pac
Discount rates, presentation, and transition
Europe – Those and…
Residual margins, DFPs, unbundling
North America – Those and…
Risk adjustment, short duration contracts
General agreement with disclosures

13. Since the 2010 Exposure Draft
Goal had been to publish a standard by June 2011.
Goal wasn’t met, several board members, including the chair, retired. Momentum was lost.
New board was slow in re-starting
Solicited analysts and other stakeholder comments
Result has been to move away from “ivory tower” principles to some more pragmatic solutions
“Irreconcilable differences” with FASB emerged
No longer seeking convergence

14. 2013 Exposure Draft IASB a revised ED in June 2013
ED - 79 pages
Basis for Conclusions pages
Numerical examples – 30 pages
ED proposes changes and seeks input only on what the IASB considers the five most material changes from the 2010 ED.
Simultaneously FASB issued its ED. FASB ED sought comments on the entire document.

15. 2013 Exposure Draft (con’t)
FASB abandoned project in April of 2014 in favor of “targeted improvements” to existing US GAAP.
Reaction from US GAAP reporters was overwhelmingly negative
IASB is currently re-deliberating. All decisions are expected to be made by year end and a final standard is expect in mid-2015.
Effective for 2018 or 2019 financial reporting.

16. Thank You