Insurance change - accounting & much, much more
Insurance change - accounting & much, much more
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Insurance change - accounting & much, much more

Insurance change – The business implications are huge

Over the next seven years, the insurance industry will face a tremendous transformation as it responds to changes in reporting and regulatory requirements as well as a changing business and customer landscape. Many business components will be affected and we advise that insurance companies adopt a proactive, holistic, and comprehensive approach to tackling these issues. Insurers will face many new global accounting, regulatory and business requirements – which often differ by jurisdiction.

What exactly are we talking about?

The following accounting changes need to be addressed by insurance companies in the next several years.

  • US GAAP Short Duration Contracts;
  • Principle Based Reserving;
  • US GAAP Long Duration Contracts;
  • IFRS 17 Insurance Contracts;
  • US GAAP Financial Instruments (Classification & Measurement);
  • US GAAP Financial Instruments (CECL);
  • US GAAP Financial Instruments (Hedging);
  • US GAAP Leases;
  • US GAAP Revenue Recognition;
  • IFRS 9 Financial Instruments;
  • IFRS 16 Leases;
  • IFRS 15 Revenue Recognition;
  • Department of Labor Fiduciary Standard;
  • Federal Reserve Capital Standards;
  • Solvency II;
  • EU Audit Reforms;
  • Brexit

This collection of new rules are obviously wide ranging, affect many areas of an insurance company’s accounting, and are best addressed in an all-inclusive and proactive manner.

Accounting change Type 2016 2017 2018 2019 2020 2021
& beyond
Final: ASU 2015-09 - Short-Duration Contracts All
Public
Private
US GAAP — Long-Duration Contracts All
Comment Period, Possible Re-exposure, Final Standard*
*Exposure Draft issued on September 29, 2016
IFRS 17 — Insurance Contracts All
Effective Date to be released with Final Standard*
*Final Standard expected in first half of 2017

U.S. Statutory Reserving

FINAL: Statutory Accounting Principles — Principles-Based Reserving (Term Life and UL) LIFE
Effective January 1, 2017; 3 Year Phase-In
EVENTUAL: Statutory Accounting Principles — Principles-Based Reserving (Other Life, Health and non-Variable Annuity products) LIFE
TBD
Modifications to AG43 and C3 Phase 2 LIFE
TBD

Capital Standards

FINAL: Solvency II All
Implemented*
*in 28 member states
Federal Reserve All
Guidance Expected

US GAAP Standards — Non Insurance Contracts

FINAL: ASU 2016-02 — Leases All
Early Adoption
Public
Private
FINAL: ASU 2015-14 — Revenue Recognition All
Early Adoption
Public
Private
FINAL: ASU 2016-01 Financial Instruments Classification and Measurement All
Public
Private
FINAL: ASU 2016-13 Financial Instruments – Credit Losses All
Early adoption
SEC Filers
Other Public Entities/Private
US GAAP — Hedging Activities All
Currently in exposure draft redeliberations, possible re-exposure, final standard*
*Exposure draft released on September 8, 2016

IFRS Standards – Non Insurance Contracts

FINAL: IFRS 9 — Financial Instruments
— IFRS 9 — Timeline All
Early adoption
Effective
— IFRS 17 — Amendment – IFRS 9 Deferral All
Effective when first applying IFRS 9
Effective, Temporary exemption expires January 1, 2021 or effective date of IFRS 17, if earlier
FINAL: IFRS 16 — Leases All
Early adoption (if IFRS 15 applied)
Effective
FINAL: IFRS 15 — Revenue Recognition All
Early adoption
Effective

Other Regulatory/ Environmental

FINAL: Department of Labor All
Effective*
*June 7, 2016
Applicable*
*April 10, 2017
Full compliance*
*January 1, 2018
FINAL: EU Audit Reforms All
Implemented*
*in 16 member states
BREXIT All
Rolling impacts

The above table represents the timelines that insurance companies must comply with in order to stay current on all insurance change standards.
 

How KPMG can help:

  • Keeping you informed;
  • Completing a high level assessment;
  • Designing and implementing the changes to your accounting systems, processes and people.

KPMG’s experienced team and sophisticated tools can help insurance companies to develop and implement a managed and well-executed accounting change program. Our approach can be adopted in phases; we focus on business impacts, effective dates, and established standards to make the process as efficient as possible.

*Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates. 


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