The Financial Accounting Standards Board last Thursday issued for public comment a controversial proposal that would change financial reporting of insurance contracts, fundamentally reconstructing the measurement of insurance liabilities and income as they are reflected in income and earnings statements.
The proposed update would apply to all contracts that meet the definition of an insurance contract, not just those written by insurance companies. It would also apply to ceding insurers in reinsurance contracts.
Basically, it would require accounting to be based on current assumptions of cash flows to fulfill the coverage on a quarterly basis, adjusted for the time value of money–even if the claims are not being paid out for years.
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Elizabeth Festa
Elizabeth Festa is a longtime business and financial services reporter with a specialty in insurance regulatory and legislative coverage at the federal and state level. She is based in Washington, D.C.
