With an effective date of January 1, 2021 for public business entities and January 1, 2022 for all other entities, insurers should begin assessing how the changes will impact their business.
The FASB’s changes to US GAAP long-duration contract accounting result in significant changes to how insurers will measure the liability for certain insurance contracts and amortize deferred acquisition costs (DAC). The changes will impact earnings emergence, introduce new data requirements, and require the modification of existing financial reporting processes. KPMG anticipates direct impacts on actuarial and finance operations, including data-focused processes, assumption development, modeling, and financial reporting.
At a high level, the proposed changes include: