Project Update

Insurance Contracts—Joint Project of the FASB and IASB

Last updated on March 14, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the FASB and IASB (the Boards). It was prepared by the staff and is for the information and convenience of the Boards’ constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.

Project Objective
Due Process Documents
*Outreach/Field Work
*Board/Other Public Meeting Dates
*Background Information
Contact Information

NOTE: This page contains information pertinent to the Joint IASB/FASB insurance contracts project. Please refer to the insurance project page for current information about the FASB’s insurance project focusing on targeted improvements to insurance accounting.

PROJECT OBJECTIVE 

The objective of this joint IASB/FASB insurance contracts project is to develop common, high-quality guidance that will address recognition, measurement, presentation, and disclosure requirements for insurance contracts (including reinsurance), even if the contracts are not issued by an insurance entity. Specifically, the project is intended to improve, simplify, and converge the financial reporting requirements for insurance contracts and to provide investors with decision-useful information.

DUE PROCESS DOCUMENTS 

Proposed Accounting Standards Update, Insurance Contracts (June 27, 2013)


On June 27, 2013, the FASB issued a proposed Accounting Standards Update, Insurance Contracts (Topic 834).

The main objectives of the guidance in this proposed Update is to increase the decision usefulness of the information about an entity’s insurance liabilities, including the nature, amount, timing, and uncertainty of cash flows related to those liabilities, and the related effect on the statement of comprehensive income, and to provide comparability, regardless of the type of entity issuing the contract. The guidance in this proposed Update would require an entity to measure its insurance contracts under one of two measurement models, referred to as the building block approach and the premium allocation approach. The proposed Update would improve convergence of U.S. GAAP and IFRSs by moving towards a more globally comparable standard.

Discussion Paper, Preliminary Views on Insurance Contracts (September 17, 2010)


On September 17, 2010, the FASB issued, for public comment, a Discussion Paper, Preliminary Views on Insurance Contracts. The comment period for the IASB Exposure Draft ended on November 30, 2010. The comment period for the Discussion Paper ended on December 15, 2010.
The FASB and the IASB held the following public roundtable meetings for the insurance project:
  • Thursday, December 9, 2010 in Tokyo, Japan
  • Thursday, December 16, 2010 in London, United Kingdom
  • Monday, December 20, 2010 in Norwalk, Connecticut, USA
Information regarding the roundtable meetings held in Tokyo and London can be found on the IASB’s roundtable meetings page. Information regarding the roundtable meetings held in Norwalk on December 20, 2010 can be found in the  Online Public Reference Room.

Invitation to Comment, An FASB Agenda Proposal: Accounting for Insurance Contracts by Insurers and Policyholders, Including the IASB Discussion Paper, Preliminary Views on Insurance Contracts (August 2, 2007)


On August 2, 2007, the FASB issued an Invitation to Comment, An FASB Agenda Proposal: Accounting for Insurance Contracts by Insurers and Policyholders, Including the IASB Discussion Paper, Preliminary Views on Insurance Contracts. The IASB Discussion Paper (issued May 2007) set forth the IASB’s preliminary views on the main components of an accounting model for an issuer’s rights and obligations (assets and liabilities) under an insurance contract. The comment period for both documents ended November 16, 2007.

*Outreach/Field Work

Public Roundtable Meetings

The FASB hosted public roundtable meetings on its June 27, 2013 Proposed Accounting Standards Update, Insurance Contracts (Topic 834).

As part of the outreach effort on the June 2013 proposed Update, the Board hosted a series of public roundtables in December 2013.
  • December 2nd—FASB office in Norwalk, Connecticut
    • 401 Merritt 7
      Norwalk, CT 06856
    • Session 1: 9:00 a.m. – 12:00 p.m. EST (discussion included topics specific to the Building Block Approach)
    • Session 2: 1:00 p.m. – 4:00 p.m. EST (discussion included topics specific to the Premium Allocation Approach)
  • December 16th—Rosemont, Illinois
    • 1:00 p.m. – 5:00 p.m. CST (discussion included scope considerations, topics related to the Building Block Approach and Premium Allocation Approach, and considerations specific to nonpublic and medium-sized entities)
Webcast

On Tuesday, July 30, the FASB hosted IN FOCUS: The Insurance Contracts Project-Part I, Scope. The webcast featured FASB member Hal Schroeder and FASB staff members discussing the proposal and answering questions submitted by viewers. For more information, click here.

On Thursday, August 1, the FASB hosted IN FOCUS: The Insurance Contracts Project-Part II, The Models. The webcast featured FASB members Tom Linsmeier and Marc Siegel, as well as FASB staff members discussing the proposal and answering questions submitted by viewers. For more information, click here.

*BOARD/OTHER PUBLIC MEETING DATES

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*February 19, 2014 Board Meeting—Scope and project direction
*January 22, 2014 Joint Board Meeting—Feedback summaries
May 23, 2013 Board Meeting—Cost-benefit analysis and consideration of complexity, authorization to ballot
March 6, 2013 Board Meeting—Treatment of changes in estimated interest crediting and accretion rates, election of the fair value option, other miscellaneous issues
February 27, 2013 Board Meeting—Presentation, Disclosure
February 20, 2013 Board Meeting—Segregated assets related to direct performance linked insurance contracts, accretion of interest on the margin
February 13, 2013 Board Meeting—Reconsideration of the measurement of investment components and the aggregate insurance contracts revenue, transition, effective date and comparative financial statements, early adoption, and comment period
February 6, 2013 Board Meeting—Accounting for guarantees, Modifications of insurance contracts, Foreign currency transactions
January 30, 2013 Joint Board Meeting—Allocation of insurance contract revenue—change in pattern of expected claims, Considering the transition proposals in the light of subsequent decisions on insurance contracts revenue
November 20, 2012 Joint Board Meeting—Discount Rate - Components of Contracts Cash Flows to Which Mirroring Does Not Apply but That Are Affected by Expected Asset Returns
November 20, 2012 Board Meeting—Scope - Guarantee Contracts
November 14, 2012 Board Meeting—Ceding Commissions, Business Combinations and Portfolio Transfers, Participation Features of Mutual Insurance Companies
October 17, 2012 Joint Board Meeting—Presentation in statement of comprehensive income comparison of methods, non-claims fulfillment costs, and acquisition costs
October 15, 2012 Joint Board Meeting—Premium allocation approach discount rate follow up, and participating contracts
October 15, 2012 Board Meeting—Re-designation of financial assets
October 3, 2012 Board Meeting—Measurement of the Aggregate Premium for the Insurance Component
September 24, 2012 Joint Board Meeting—Acquisition Costs in the Pre-coverage Period, Transition Requirements
September 5, 2012 Board Meeting—Unlocking of the Single Margin
August 1, 2012 Board Meeting—Charitable Gift Annuities
July 25, 2012 Board Meeting—Title Insurance Contracts, Advertising Costs: Direct Response Advertising
June 12, 2012 Joint Board Meeting—Earned Premiums, Unbundling: Allocation of Cash Flows
May 22-24, 2012 Joint Board Meeting—Acquisition Costs, Separation of Investment Components from the Insurance Contract, Summary of Separation Approaches, The Use of OCI
April 18, 2012 Joint Board Meeting—Reinsurance, Contract Modifications, Riders and Policy Loans
March 21, 2012 Joint Board Meeting—Unit of Account, Separation of Investment Components from the Insurance Contract
March 7, 2012 Board Meeting—Financial Instruments with Discretionary Participation Features
February 27, 2012 Joint Board Meeting—Eligibility Criteria for the Premium Allocation Approach, Mechanics for the Premium Allocation Approach, Measurement of Liabilities for Infrequent, High-Severity Events, Onerous Contracts, Unbundling Goods and Services Components, Financial Instruments with Discretionary Participation Features (IASB only)
December 15-16, 2011 Joint Board Meeting—Participating Contracts, Discounting of the Liability for Incurred Claims, Unit of Account, Onerous Contracts
November 30, 2011 Board Meeting—Accounting for Participation Features
November 16, 2011 Joint Board Meeting—Disaggregation of Explicit Account Balances
October 20, 2011 Joint Board Meeting—Fixed-Fee Service Contracts, Premium Allocation Approach, Statement of Financial Position, Statement of Comprehensive Income
September 19, 2011 Joint Board Meeting—Risk Adjustment and Disclosures
September 7, 2011 Board Meeting—Single Margin and Liability for Incurred Claims
July 21, 2011 Joint Board Meeting—Premium Allocation Approach
June 15, 2011 Joint Board Meeting—Statement of Comprehensive Income
June 13, 2011 Joint Board Meeting—Residual Margin and Acquisition Costs
May 31, 2011 Joint Board Meeting—Reinsurance
May 17-18, 2011 Joint Board Meeting—Risk Adjustment
May 11, 2011 Joint Board Meeting—Policyholder Participation
May 4, 2011 Joint Board Meeting—Unbundling
April 27, 2011 Joint Board Meeting—Modified Approach
April 12, 2011 Joint Board Meeting—Discount Rate
March 29, 2011 Joint Board Meeting—Unlocking the Margin and the Insurance Working Group Meeting
March 22, 2011 Joint Board Meeting—Risk Adjustment and Contract Boundary
March 21, 2011 Joint Board Meeting—Risk Adjustment, Discount Rate, and Unbundling
March 15, 2011 Joint Board Meeting—Risk Adjustment, Discount Rate, Initial Recognition, and Definition
March 14, 2011 Joint Board Meeting—Presentation, Composite Margin, and Discount Rate
March 2, 2011 Joint Board Meeting—Scope, Field Tests, Uncertainty, and Acquisition Costs
March 1, 2011 Joint Board Meeting—Discounting and Scope
February 18, 2011 Joint Board Meeting—Discount Rate, Cash Flows, Risk Adjustment, Recognition, Residual or Composite Margin, and Presentation
February 17, 2011 Joint Board Meeting—Project Axioms and Assumptions, and Discount Rate
February 16, 2011 Joint Board Meeting—Unbundling
February 9, 2011 Board Meeting—Changes to U.S. GAAP
February 3, 2011 Board Meeting—Discount Rate
February 2, 2011 Joint Board Meeting—Acquisition Costs
January 19, 2011 Joint Board Meeting—Discount Rate
January 18, 2011 Joint Board Meeting—Comment Letter Summaries
December 15, 2010 Joint Board Meeting—Project Review and Outreach Summary
July 28, 2010 Board Meeting—Modified Approach
July 19, 2010 Joint Board Meeting—Unbundling, Unit-Linked Contracts, Modified Approach, and Investment Contracts with Discretionary Participating Features
June 23, 2010 Joint Board Meeting—Cash flows, Acquisition Costs, Participating Contracts, Unbundling, Presentation, Residual or Composite Margin
June 15 & 16, 2010 Joint Board Meeting—Cash Flows, Foreign Currency, Risk Adjustment, Reinsurance, Acquisition Costs, Residual or Composite Margin, Participating Contracts, Insurance Risk, Embedded Derivatives, Derecognition, Portfolio Transfers
June 10, 2010 Joint Board Meeting—Participating Contracts and Risk Adjustment
June 9, 2010 Board Meeting—Modified Approach
June 1, 2010 Joint Board Meeting—Transition, Portfolio Transfers, and Business Combinations
May 19, 2010 Joint Board Meeting—Unbundling and Scope
May 18, 2010 Joint Board Meeting—Residual Margin, Risk Adjustment, Composite Margin, Unit of Account, and Disclosures
May 5, 2010 Board Meeting—Contract Boundaries
April 22, 2010 Joint Board Meeting—Discount Rate
April 14, 2010 Board Meeting—Use of Other Comprehensive Income
March 24, 2010 Joint Board Meeting—Disclosures
March 23, 2010 Joint Board Meeting—Risk Adjustment and Participating Contracts
March 22, 2010 Joint Board Meeting—Definition and Scope
March 17, 2010 Joint Board Meeting—Risk Adjustment
March 16, 2010 Joint Board Meeting—Acquisition Costs
March 15, 2010 Joint Board Meeting—Residual Margin
February 10, 2010 Joint Board Meeting—Reinsurance and Policyholder Accounting
January 27, 2010 Board Meeting—Policyholder Behavior and Deposit Floor
January 19, 2010 Joint Board Meeting—Measurement Approach, Risk Adjustment, Recognition, Residual Margin, and Policyholder Behavior
January 5, 2010 Joint Board Meeting—Unbundling, Presentation, and Embedded Derivatives
December 16, 2009 Joint Board Meeting—Measurement Approach and Risk Adjustment
November 24, 2009 Board Meeting—Recognition, Embedded Options, and Derecognition
November 18, 2009 Joint Board Meeting—Participating Contracts
October 28, 2009 Joint Board Meeting—Scope, Measurement Approach, Acquisition Costs, and Presentation
July 23, 2009 Joint Board Meeting—Fulfillment Value and Acquisition Costs
July 21, 2009 Board Meeting—Risk Adjustment, Measurement Approach, and Discounting
May 18, 2009 Board Meeting—Risk Adjustment and Acquisition Costs
April 2, 2009 Board Meeting—Cash Flows
February 25, 2009 Board Meeting—Measurement Approach for Insurance Contracts
October 29, 2008 Agenda decision announcement

*BACKGROUND INFORMATION

In 2002, the IASB decided to address accounting for insurance contracts in a two-phase project. The first phase of the project was completed in May 2004 with the issuance of International Financial Reporting Standard (IFRS) 4, Insurance Contracts, which provided temporary guidance for insurers adopting IFRSs in 2005. IFRS 4 made limited improvements to accounting practices for insurance contracts, permitted a wide variety of practices to continue, and avoided major changes that might be reversed upon completion of the second phase.

As part of the second phase of the project, in May 2007, the IASB issued a Discussion Paper, Preliminary Views on Insurance Contracts, which focused on developing a comprehensive accounting model for an insurer’s rights and obligations (insurance assets and liabilities) arising from insurance activities.

In August 2007, the Board issued an Invitation to Comment, An FASB Proposal: Accounting for Insurance Contracts by Insurers and Policyholders, which included the IASB’s Discussion Paper. The Boards’ objective in undertaking the proposed project was to develop a common, high-quality standard that addresses recognition, measurement, presentation, and disclosure requirements for insurance contracts. The Board received 45 comment letters in response to the Invitation to Comment, which led to its decision in October 2008 to participate in the project jointly with the IASB. Since then, the Boards have held more than 20 meetings to discuss various proposals to develop a common standard for insurance contracts. Although the project on insurance contracts is a joint project, it is not part of the Boards’ Memorandum of Understanding that was issued to acknowledge their commitment to the development of high-quality, compatible accounting standards and further the convergence of U.S. GAAP and IFRSs.

The IASB published an Exposure Draft on financial reporting for insurance contracts on July 30, 2010, which, when finalized, will replace IFRS 4. In developing the IASB’s Exposure Draft, most of the discussions about the proposed insurance accounting approaches were held jointly with the FASB. While the Boards reached common decisions in many areas, they reached different conclusions in others. Some Board members prefer the IASB’s proposed approach; however, the majority prefers an alternative approach. Regardless of Board members’ individual views and uniform commitment to convergence, the Board determined that additional information was needed about whether the possible new accounting guidance would represent a sufficient improvement to U.S. GAAP to justify issuing new guidance. On September 17, 2010, the Board issued, for public comment, a Discussion Paper, Preliminary Views on Insurance Contracts.

The Boards jointly deliberated topics from the FASB discussion paper and IASB exposure draft. On June 27, 2013, the FASB issued proposed Accounting Standards Update, Insurance Contracts (Topic 834) for public comment. In light of the feedback received on the 2013 proposed Update, the Board decided to limit the scope to insurance entities as described in existing U.S. GAAP and that the project should focus on making targeted improvements to existing U.S. GAAP. For short-duration contracts, the Board decided to limit the targeted improvements to enhancing disclosures.

For long-duration contracts, the Board concluded that decisions reached by the IASB in its 2013 IASB Exposure Draft, Insurance Contracts, should be considered when contemplating improvements to existing U.S. GAAP.

For current information about the FASB’s insurance project focusing on targeted improvements to insurance accounting, visit the current FASB Insurance Project page.

For additional and current information about the IASB’s insurance contracts project visit the IASB Insurance Contracts Project page.

CONTACT INFORMATION

FASB
Meredith Brown
Practice Fellow
mabrown@fasb.org
 
Jeremie Richer
Assistant Project Manager
jricher@fasb.org
 
Jay Shah
Project Research Associate
jshah@fasb.org
 
Jeff Pooley
Postgraduate Technical Assistant
jwpooley@fasb.org
 
Kate Konetzke
Postgraduate Technical Assistant
klkonetzke@fasb.org