International Insurance Accounting Committee Update


By Les Rehbeli, FCIA

The International Insurance Accounting Committee (IIAC) reports to the International Relations Council (IRC) of the CIA, and focuses on international developments as they pertain to the accounting and valuation of insurance contracts. Recently, the IIAC has begun a coordination effort with various CIA committees to help Canadian actuaries prepare for changes that will result from the soon-to-be-released accounting standards for the valuation of insurance contract liabilities (IFRS X).

The International Accounting Standards Board (IASB) is in the final stages of developing its proposed accounting standard for valuation of insurance contract liabilities under international financial reporting standards (IFRS X), with the intent of releasing the final standard by the end of 2016 or early 2017. While the final standard will be similar in many respects to the exposure draft that was issued in 2013, the IASB has made several tentative decisions on certain topics that will change the 2013 exposure draft. The IASB has largely concluded its deliberations, although it continues to consider a few issues. Some examples include the level of aggregation, the release pattern of the contractual services margins for contracts without direct participation features, and presentation and disclosure of revenue and expense.

The new standard is expected to become effective in 2020 or 2021, and might require the calculation of one or two prior years for comparative purposes. Although the core principles of the new standard bear some resemblance to our current Canadian Standards of Practice, there are many differences that will require changes in valuation approach, changes in valuation systems, and changes in financial reporting processes. Significant implementation effort is expected for most insurers, and actuaries will play a key role in this transition.

With the implementation of IFRS X, revisions will be needed to the current Standards of Practice and to supporting guidance material. The Actuarial Standards Board (ASB) is responsible for reviewing the CIA Standards of Practice and modifying them as needed, and has established a designated group to do so. The CIA is responsible for providing supplementary guidance.


New IIAC Coordinating Role 

The CIA has several committees that are actively monitoring these developments, including the Practice Council, the life insurance and property and casualty (P&C) financial reporting committees (CLIFR and PCFRC), and the Appointed/Valuation Actuary Committee, each with a specific focus. For example, CLIFR is broadly responsible for developing educational material that supplements the standards of practice related to valuation of life insurance liabilities, while the PCFRC plays a corresponding role related to P&C liabilities.

With so many groups involved, there is the possibility of both overlap (duplicative and possibly conflicting efforts) and omission (topics being ignored as they don’t fall under anybody’s specific purview). To help address this risk, the IIAC will play a newly created coordinating role among the various CIA committees to ensure that appropriate guidance is developed, and to help Canadian actuaries understand the differences in valuation requirements compared to our existing standards and guidance.

Canada-Specific Issues 

We anticipate that the International Actuarial Association (IAA) will publish much of the guidance that will be needed, and in fact it is in the process of drafting a model International Standard of Actuarial Practice (ISAP) and several supporting International Actuarial Notes (IANs) to supplement IFRS X. The ASB and the CIA will review these international standards and guidance to adopt or adapt them to the best extent possible, but will introduce additional guidance if necessary to address Canada-specific issues. We also plan to review the existing CIA educational notes and research papers as they pertain to valuation topics and assess whether they are still needed under the new framework, and if so, whether they need to be modified. Finally, we will consider issuing material that highlights important differences between the current Canadian approach and the new IFRS X approach. Once a need is identified, we will work with the appropriate committee(s) to develop or modify the guidance, and assist in the development and review process.

IIAC Mandate 

Our specific mandate has recently been revised to reflect this new work. With regard to new international accounting and actuarial standards for the valuation of insurance and related products, our revised mandate is to

To ensure effective linkage to the various CIA committees, we have expanded our membership to include members of PCFRC, the ASB designated group, and the Appointed/Valuation Actuary Committee, and will shortly include representation from CLIFR.

Look for more updates on this developing topic in the months and years ahead.

Les Rehbeli, FCIA, is Chair of the International Insurance Accounting Committee.

Canadian Institute of Actuaries/Institut canadien des actuaires