FASB - Proposed changes for insurance contracts 

July 15: The FASB recently issued a proposed Accounting Standards Update (ASU) that would change the accounting and financial reporting for insurance and reinsurance contracts issued and reinsurance contracts held regardless of the type of entity issuing or holding the contract.

This would be a change from current U.S. GAAP for insurance contracts, which generally applies only to insurance companies and not to other entities issuing similar contracts (e.g., some financial guarantee contracts). Other than reinsurance contracts, the proposed ASU does not address accounting by policyholders.

The proposed ASU introduces a building block approach (based on discounted estimates of future cash flows under the contract and a margin to remove any gain at inception) to account for most life, annuity, and long-term health contracts and a premium allocation approach (comprising a liability for the remaining coverage under the contract and a liability for incurred claims) for most property and casualty and short-term health contracts. These approaches would replace the numerous accounting models that were developed in U.S. GAAP to address specific types of insurance contracts.

Read a July 2013 report [PDF 602 KB] prepared by KPMG LLP: Defining Issues: FASB’s Proposed Changes for Insurance Contracts

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