Accounting for Insurance Contracts

Weaknesses in various accounting standards have forced accounting standard setters to review current approaches to insurance accounting.

New regulatory moves, particularly IFRS 4, now make it very important for accountants within the insurance industry not only to update themselves on proposed new accounting standards but also to ensure that they represent the risks and performance accurately on the financial statements.

Revolutionary changes are expected to take place over the next two years, creating a demand for people with knowledge and expertise in ‘fair value’ accounting, hedging and risk management.

The New IFRS 4 Insurance Contracts standard requires certain insurance contracts to be valued using fair value accounting.

This course covers all of the important areas of regulatory change in this subject, focusing on both the standards themselves and their application in practice.

Course Content:

Introduction to IFRS 4
 Definition of an Insurance Contract
 Unbundling Lending/Deposit Component
 Finite insurance
 Current Exemptions under IAS 8
 Participating Features

Insurance project - Phase Two
 Asset Liability Approach
 Impact on Credit Ratings
 Profit & Loss Volatility
 Hidden Loans
 Embedded Derivatives

Life Assurance
 Case Studies on how companies account for Life Assurance
 Enhanced Disclosure Requirements
 Case Study: the Equitable Life Scandal
 Embedded Value Accounting

Liability Adequacy Testing
 Carrying Value of Insurance Liabilities
 IAS 37 Provisioning
 FRS 4 Marking to Market Liabilities

Participation Features
 Equitable Life Issues
 IAS 32 Equity vs Liability
 Disclosure Requirements

Examples of Current Insurance Accounting Practices
 Deferred Acquisition Costs
 Deferral & Matching of Premiums
 Incurred but Not Reported (IBNR) Accounting
 Examples of Accounting for Life Assurance

Insurance assets – IAS 39
 Category of asset – trading, available-for-sale, held to maturity or loans
 Valuation issues and the treatment of gains and losses

Changes in Accounting Policies
 Current market interest rates
 Continuation of Existing Practice
 Prudence
 Future Investment Margins
 Shadow Accounting
 Discretionary Participation Features

Insurance contracts and Financial Instruments
 Financial Risk v Insurance Risk
 Valuation of financial instruments, treatment of gains and losses and the hedging exemptions available

Treatment of Investment Linked Contracts
 Separate Account Contracts
 Capital Appreciation/Depreciation of Underlying Assets
 Dealing with contracts without Insurance Risk
 Deferred Acquisition Accounting

Disclosures
 Explanation of Recognised Amounts
 Amount, Timing & Uncertainty of Cash Flows

Delivery:	In house
Category:	Accountancy