IASB April 2009
The Board discussed the following aspects of a measurement approach for insurance contracts:
- margins, including subsequent measurement
Margins, including subsequent measurement
The Board decided tentatively that if the initial measurement of an insurance contract results in a day-one loss, the insurer should recognise that day-one loss in profit or loss.
The Board also discussed whether:
- a measurement approach for insurance contracts should incorporate a separate risk margin that is remeasured at each reporting date.
- a fulfilment notion should include a separate service margin.
- all margins identified for each of the candidate measurement approaches are part of the insurance liability rather than a separate liability outside the insurance liability.
Views diverged and no clear consensus emerged. The Board will return to the topic of margins at a future meeting.
Acquisition costs
The Board discussed an example in which two insurers issue identical insurance contracts but incurred different acquisition costs and, as a result, charged premiums that differ by the same amount. The Board decided tentatively that those contracts should have the same initial measurement
As a follow up, the Board decided tentatively that at inception an insurer should recognise as revenue the part of the premium that covers acquisition costs. For this purpose, acquisition costs should be limited to the incremental costs of issuing (ie selling, underwriting and initiating) an insurance contract and should not include other direct costs. Incremental costs are those costs that the insurer would not have incurred if it had not issued those contracts.
Policyholder behaviour
The Board discussed future premiums arising from existing insurance contract. The aim of the session was educational and no decisions were made.
Next steps
In May, the Board will continue its discussion of measurement.
Location: London UK
Date: 22/04/2009
Observer Notes