Insurers Respond to Contract Language Proposal

A group representing North American property/casualty insurers has answered a call for comments from the International Accounting Standards Board (IASB) regarding how insurance contracts are valued on carriers’ balance sheets.

In an August 19 comment letter to IASB Chairman Sir David Tweedie, the Group of North American Insurance Enterprises (GNAIE) criticized the Premium Allocation Approach proposed last month in the IASB’s Insurance Contracts Exposure Draft. GNAIE says IASB approach is overly complex and fails to account for short-term insurance contracts properly.

"In contrast to the IASB premium allocation approach, GNAIE proposed an Alternative Measurement Paradigm for short-term property/casualty contracts to differentiate those short-term contracts that should qualify for a simplified measurement and reporting approach from those that would be better suited to a building block approach," said Jerry de St. Paer, executive chair of GNAIE in the Comment Letter to the IASB.

Instead, GNAIE recommends an approach based on the use of the existing measurement approach in use for nearly a century for property/casualty insurance contracts in the United States, and favored by the Financial Accounting Standards Board.