• Industry: Financial Services, Insurance
  • Type: Business and industry issue
  • Date: 1/15/2014

Business Considerations 

Business considerations
Insurers will need to consider the broader business impacts and how the changes may affect the types of products that an insurer sells, the investments that it holds, executive compensation arrangements, and how insurers communicate to the market.
“Insurers will need to explain the impact of the standards on earning patterns in a way that doesn’t increase complexity or cause shareholder confusion.”

Laura Hay, National Insurance Practice Leader, KPMG in the US

The things you need to know:

  1. Traditional key performance indicators may change significantly under the proposals and while insurers may initially continue to report and use traditional measures, they may need to identify new KPIs.
  2. Many insurers will review their product pricing portfolio to determine the profit signature of their products under the proposals and identify sources of volatility stemming from the use of current information.
  3. More extensive disclosure requirements may cause product pricing and contract margins to become more transparent and result in increased competitive pressure.
  4. Profits recognized under the proposals are expected to emerge differently than under current accounting and whether profits will emerge more slowly or quickly will depend heavily on each jurisdiction’s current GAAP.
  5. It will be important to ensure that the information used by analysts is easy to find because presentation may change and there will be new disclosures.

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Accounting Change for Insurers

IFRS – insurance
Provide updates regarding the status of IFRS and counsel on how to prepare for the imminent changes.