The computational and timing challenge of quarterly nonlife (re)insurance liability evaluation under IFRS 4 phase 2

Eric Dal Moro () and Jayne Faulkner ()
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Eric Dal Moro: SCOR, Postal: General Guisan Quai 26, 8022 Zurich, Switzerland
Jayne Faulkner: SCOR, Postal: General Guisan Quai 26, 8022 Zurich, Switzerland

Journal of Financial Perspectives, 2014, vol. 2, issue 3, 81-98

Abstract: Within the many changes and revolutions that the (re)insurance industry will face in the next few years, the introduction of the new standard IFRS 4 phase 2 is one that will certainly impact the way in which the (re)insurance business is managed. Not only will this new standard impact insurance accounting schemes, but it will also impact the performance evaluation of the whole insurance industry in general and each line of business being underwritten by the industry. As a result, some companies may decide to withdraw from some lines of business and/or to concentrate on other lines of business.

Given that the final stage of implementation is still years away, it seems that many are not spending the time necessary to consider the timing and stress issues that the (re)insurance industry will face when it comes to implementing the new standard. We suggest that these issues need to be considered soon, since they will most likely result in significant organizational changes involving actuaries, finance, risk modelling and investor relations. This small article highlights some of the major issues that (re)insurance companies will face when coming to implement the new standard and proposes some practical solutions to tackle the most pressing ones.

Keywords: IFRS 4 Phase 2; Insurance; Risk adjustment margin; Liability; Cost of capital; Exposure draft (search for similar items in EconPapers)
JEL-codes: G22 K23 M41 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofipe:0046

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